One-Year Limitation Under Finance Act, 1994 Notifications Does Not Apply To SEZ Refund Claims: CESTAT Chandigarh

The Chandigarh bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed Nokia Solutions and Networks India Pvt. Ltd.'s appeal against the rejection of its service tax refund claim.

It held that notifications issued under the Finance Act, 1994 cannot impose restrictions on Special Economic Zone (SEZ) units that are not prescribed under the SEZ Rules.

The bench of Judicial Member S. S. Garg and Technical Member P. Anjani Kumar observed, "the Notification issued under the Finance Act, 1994 cannot impose restrictions which are not prescribed under SEZ Rules and consequently the limitation of one year period does not apply in the present case."

Nokia Solutions had sought a refund of about ₹2.27 crore in service tax paid on input services used for its authorised SEZ operations between July 2012 and September 2013.

The Department rejected the claim after finding that most of the refund applications had been filed beyond the one-year limitation prescribed under two notification from 2012 and 2013. The original adjudicating authority had also cited deficiencies in supporting documents. However, the Commissioner (Appeals) upheld the rejection solely on the ground of limitation.

Before the tribunal, Nokia Solutions argued that the SEZ Act grants exemption from service tax for authorised operations. It submitted that the SEZ Rules, which govern the grant of such exemptions, do not prescribe any limitation period for filing refund claims.

The company also contended that the SEZ Act overrides inconsistent provisions of other laws, including notifications issued under the Finance Act. The tax department, on the other hand, maintained that compliance with the conditions in those notifications, including the one-year limitation period, was mandatory. It also sought a remand to verify the supporting documents.

After considering the rival submissions, the tribunal noted that the Commissioner (Appeals) had rejected the refund claim only on the ground of limitation. The other objections raised in the original order had not been sustained. The tribunal also recorded that there was no dispute that Nokia Solutions was an SEZ unit. It further noted that the input services had been received for its authorised operations.

The tribunal observed, "this issue is no more res integra and different Benches of the Tribunal has consistently held that SEZ Act has an overriding effect over the provisions of the Finance Act, 1994 and hence the conditions prescribed under the Notification are redundant."

Relying on the Telangana and Andhra Pradesh High Court's decision in GMR Aerospace Engineering Limited and subsequent tribunal rulings affirmed by the Supreme Court, the tribunal held that the SEZ Act overrides inconsistent provisions of the Finance Act.

It observed that notifications issued under the Finance Act cannot restrict statutory exemptions available to SEZ units. The tribunal also found that the decisions cited by the Department dealt with the general law of limitation. They were not applicable because they did not concern SEZ units.

Allowing the appeal, the tribunal set aside the order rejecting the refund claim. It also granted Nokia Solutions consequential relief in accordance with law.

For Appellant: Advocate Deepak Thackur,

For Respondent: Siddharth Jaiswal and S.K. Meena, Authorized Representatives