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ST – Refund - Percentage of Input services that is allowable in r/o SEZ area is to be computed by excluding services that were provided exclusively to SEZ and in respect of which there is no dispute: CESTAT

By TIOL News Service

NEW DELHI, MAY 27 , 2014: INGENUITY knows no bounds, aptly sums up the issue involved in this case.

The appellant filed a refund claim of Rs.1,69,576/- in respect of input services provided to Special Economic Zone (SEZ).

Out of the said amount, the lower authorities sanctioned the refund claim of Rs.43,656/- which was in respect of the services exclusively provided to SEZ. The balance amount of Rs.1,25,920/- was rejected by holding that the said were relatable to SEZ area as also to the area outside SEZ.

The matter travelled to the Tribunal and vide Final Order dated 04.04.2012 the Bench remanded the matter to the lower authorities for re-calculation of refund by adopting the value of services rendered inside the SEZ as well as outside the SEZ.

During the de novo adjudication, the appellants produced a Chartered Accountant certificate indicating that value of the services provided to SEZ was 49.16%. The lower authorities applied the above ratio to the total refund of Rs.1,69,576/- and after taking into account the already sanctioned refund claim of Rs.43,656/-, they allowed the balance refund amount of Rs.39,708/-.

Again, the appellants took the matter to the Tribunal.

It is submitted that the ratio of 49.16% was to be applied to the disputed amount only inasmuch as there was no dispute about the already sanctioned refund of Rs.43,656/-. Simply put, the ratio of 49.16% is to be applied to the balance amount of Rs.1,25,920/- which was relatable to the common services provided to SEZ as well as outside the SEZ area.

The Bench observed -

"5. I find force in the above contention of the Ld. Advocate. There is no dispute about the refund of Rs.43,656/-, which was also not the subject matter of the Tribunal's order dated 04.04.2012. The dispute before the Tribunal was in respect of Rs.1,25,920/-, which related to the refund of common services. As such, the percentage of the value of the services has to be applied to the common services and not to the entire refund claim."

In fine, the order was set aside and the matter was remanded to the original adjudicating authority for recalculation of the appellants' entitlement to the refund.

In passing: Also see 2013-TIOL-1154-CESTAT-DEL.

(See 2014-TIOL-868-CESTAT-DEL)


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