The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh, has held that the one-year limitation prescribed under Service Tax exemption notifications cannot be invoked to deny refund claims filed by SEZ units. 

The bench of  Justice S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) allowed the appeal filed by Nokia Solutions and Networks India Private Limited, setting aside the orders rejecting its refund claim of ₹2.27 crore solely on the ground of limitation. 

The appellant/assessee, Nokia Solutions and Networks India Pvt. Ltd., an SEZ unit registered in Gurgaon, had received various input services used for its authorised operations during the period July 2012 to September 2013. The company had obtained the requisite approval from the SEZ Approval Committee for these services and subsequently sought refund of the service tax paid under Notification No. 40/2012-ST dated June 20, 2012 and Notification No. 12/2013-ST dated July 1, 2013. 

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The total refund claimed amounted to ₹2,27,14,436, spread across five refund applications. While one application relating to July–September 2013 was filed in November 2014, the remaining claims covering July 2012 to June 2013 were filed on February 26, 2015. 

The department issued a deficiency memo and later rejected the refund claims, primarily holding them to be barred by the one-year limitation prescribed under the relevant notifications. Although several other objections had initially been raised, the Commissioner (Appeals) ultimately sustained the rejection only on the ground of limitation. 

The principal question before the Tribunal was whether the one-year time limit prescribed under Notification Nos. 40/2012-ST and 12/2013-ST is mandatory for SEZ refund claims, or whether the statutory exemption under the SEZ Act overrides such procedural restrictions. 

The appellant contended that Section 26 of the SEZ Act grants a substantive exemption from service tax on taxable services used for authorised operations. Section 51 of the SEZ Act gives the statute an overriding effect over any inconsistent provision contained in other laws. Rule 22 of the SEZ Rules, 2006, which prescribes the conditions for availing exemption, does not prescribe any limitation period for filing refund claims. Consequently, the limitation introduced through notifications issued under Section 93 of the Finance Act cannot curtail the statutory benefit granted under the SEZ Act. 

The company relied heavily upon the judgment of the Telangana and Andhra Pradesh High Court in GMR Aerospace Engineering Ltd., which was subsequently affirmed by the Supreme Court, along with several later CESTAT decisions consistently adopting the same principle. 

The department argued that the notifications specifically required refund applications to be filed within one year from the relevant date and that the appellant had admittedly failed to comply with this condition.

The department further submitted that certain supporting documents required to verify admissibility of the refund had not been furnished and therefore sought remand of the matter for fresh verification. 

The Bench observed that the Commissioner (Appeals) had rejected the refund exclusively on limitation, while the other objections originally raised had already been dropped.

The Tribunal held that there was no dispute regarding Nokia being an SEZ unit during the relevant period; receipt of input services for authorised operations; and approval from the competent Approval Committee. 

The Tribunal extensively relied upon the High Court’s decision in GMR Aerospace Engineering Ltd., wherein it had been held that Section 26 of the SEZ Act itself grants exemption from service tax; the conditions governing such exemption must flow only from the SEZ Act and SEZ Rules; notifications issued under the Finance Act cannot impose additional substantive restrictions upon SEZ units. 

Reiterating settled law, the Tribunal held that Section 51 of the SEZ Act overrides inconsistent provisions contained in other statutes.

It observed that once Parliament itself has granted exemption under Section 26 of the SEZ Act, the charging provisions under the Finance Act cease to apply to services provided for authorised SEZ operations. Consequently, exemption notifications issued under the Finance Act become redundant insofar as SEZ units are concerned, and procedural conditions contained therein—including limitation—cannot restrict statutory benefits. 

The Tribunal also referred to several recent decisions including Cummins Turbo Technology, Cipla Ltd., DLF Assets Pvt. Ltd., Eclerx Services Ltd., Adani Power Mundra Ltd., Lanco Solar Pvt. Ltd., and Sapient Consulting Pvt. Ltd., all consistently recognising the overriding nature of the SEZ Act. 

The Bench declined to rely upon the authorities cited by the Revenue, observing that those decisions were based on the general law of limitation and did not involve refund claims by SEZ units, which stand on a distinct statutory footing under the SEZ Act. 

Allowing Nokia’s appeal, CESTAT held that the limitation of one year prescribed under Notification Nos. 40/2012-ST and 12/2013-ST does not apply to refund claims of SEZ units; notifications issued under the Finance Act cannot impose restrictions absent from the SEZ Rules; and the impugned order rejecting the refund solely on limitation was unsustainable.

The Tribunal set aside the impugned order and granted consequential relief in accordance with law. 

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