C.C.E. AND S.T. - RAJKOT vs. RELIANCE INDUSTRIES LTD.

C/TAXAP/740/2019 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 740 of 2019 With R/TAX APPEAL NO. 743 of 2019

FOR APPROVAL AND SIGNATURE:

HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MS. JUSTICE SANGEETA K. VISHEN ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment? YES 2 To be referred to the Reporter or not? NO 3 Whether their Lordships wish to see the fair copy of the judgment? NO 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder? NO ====================================== C.C.E AND S.T. - RAJKOT Versus RELIANCE INDUSTRIES LTD. ====================================== Appearance: MR. PARTH H BHATT(6381) for the Appellant(s) No. 1 MR DILIP L KANOJIYA(3691) for the Opponent(s) No. 1 ====================================== CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MS. JUSTICE SANGEETA K. VISHEN

Date: 12/12/2019 Page 1 of 34

C/TAXAP/740/2019 JUDGMENT ORAL JUDGMENT (PER: HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. In both these appeals under section 83 of the Finance Act, 1994 read with section 35G of the Central Excise Act, 1944, the appellant has challenged the common order dated 13.03.2019 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench, Ahmedabad (hereinafter referred to as 'the Tribunal'), in Appeal No. ST/12887- 12888/2018, by proposing the following questions, stated to be substantial questions of law: “i) Whether the Hon'ble Tribunal, was right to hold and interpret that mandatory time limit to file refund claim prescribed in clause (e) of the Para 3(III) of the Notification No.12/2013-ST dated 01.07.2013 issued by the Government of India, Ministry of Finance, Department of Revenue is not applicable to the refund claims covered by Table-II of Form A-4 of Notification No. 12/2013-ST dated 01.07.2013. ii) Whether the Hon'ble Tribunal, was right to hold that the refund claim in respect of Table-II, Form A-4 of Notification No. 12/2013-ST dated 01.07.2013 has been correctly sanctioned by the Adjudicating Authority, as the Respondent has preferred the refund claim within one year from the date of ISD invoice issued in favour of SEZ Unit, which is a complete misreading of clause (e) of Para III of Notification No. 12/2013-ST dated 01.07.2013. iii) Whether the Hon'ble Tribunal was right to hold that the Adjudicating Authority has exercised discretion power to allow filing of refund claim beyond one year by the appellant, when Adjudicating Authority has not recorded any reasons/findings to condone such delay. iv) Whether the Hon'ble Tribunal has the power (or) jurisdiction to condone the delay in filing the refund claim as per clause (e) of the Para 3(III) of the Notification No. Page 2 of 34

C/TAXAP/740/2019 JUDGMENT 12/2013-ST dated 01.07.2013, which is vested with the Assistant/Deputy Commissioner of Central Excise?” 2. Since the facts and contentions in both the appeals are common and the parties are also common, the same were taken up for hearing together and are decided by this common judgment. 3. The facts stated briefly are that the respondent - Reliance Industries Ltd. filed refund claims under Notification No.12/2013-ST dated 01.07.2013 in the prescribed form, claiming refund of service tax paid under reverse charge mechanism for taxable services received for carrying out authorized operations in the SEZ under Table-II of the application; and also claimed refund of service tax paid along with cesses on specified services that are common to the authorized operations of the SEZ and the operations in the domestic tariff area distributed to SEZ units under ISD (Input Service Distributor) invoices under rule 7 of the Cenvat Credit Rules, 2004 (hereinafter referred to as the “CC Rules”) under Table-II. In Tax Appeal No. 740 of 2019, the claim was filed for the quarter January 2017 to March 2017 and in Tax Appeal No. 743 of 2019, the claim pertained to the period April 2017 to June 2017. 3.1 The adjudicating authority, after considering the relevant documents enclosed with the refund claims, found that insofar as the refund claims related to services used exclusively for authorised operations of the SEZ is concerned, they had been filed within a period of one year from the end of the month in which actual payment of service tax was made; and insofar as Page 3 of 34

C/TAXAP/740/2019 JUDGMENT the refund claims in respect of specified services that were common to the authorised operations of the SEZ and the operations in the domestic tariff area are concerned, such claims were filed within one year from the date of ISD invoices issued to SEZ unit. He, accordingly, sanctioned the entire refund claims for the entire amount of Rs.248.05 crores in respect of service tax paid on taxable services received for carrying out authorised operations in the SEZ as well as service tax distributed to SEZ units under ISD invoices under rule 7 of the rules. 3.2 The appellant challenged the order passed by the adjudicating authority before the Commissioner (Appeals), GST and Central Excise. Before the Commissioner (Appeals), on behalf of the respondent, it had been contended that the adjudicating authority had adopted the same reasoning and practice that had been followed by his predecessors in the past and which orders had been accepted by the revenue. It was further contended that the limitation provided in clause (e) of paragraph 3(III) of Notification No.12/2013 of one year from the end of the month in which actual payment of service tax was made by the SEZ unit to the registered service provider, did not apply to refunds covered by Table-II of Form A-4. It was submitted that the services in respect of which refund was claimed under Table-II were common to the domestic tariff area units and the SEZ units, for which payment is made by the domestic tariff area unit to the registered service provider. In respect of such services, there was no privity of contract between the SEZ units and the registered service provider; consequently, the question of the SEZ unit making any actual payment to such registered provider did not arise. Thus, the Page 4 of 34

C/TAXAP/740/2019 JUDGMENT event which is the starting point for calculating the limitation under clause (e) never occurred in respect of services covered under Table-II. It was further submitted that assuming for the sake of argument that clause (e) applies to services covered under Table-II, the order of the adjudicating authority does not deserve to be interfered with as he has adopted the consistent approach as adopted by his predecessors for prior periods. 3.3 The Commissioner (Appeals) found force in the submission of the respondent that insofar as refund of service tax paid on the specified services distributed by input service distributor is concerned, the invoices of such services have been issued by the registered service provider in the name of the input service distributor and payment of value of service along with service tax is also made by the input service distributor to the registered service provider, therefore, the condition prescribed by clause (e) of paragraph 3(III) of the notification cannot be made applicable to such cases. He further found that in case of invoices issued in the name of the input service distributor office of the respondent, the input service distributor office is liable to make payment of service tax to the service provider and, therefore, the substantive benefit available under the notification cannot be denied to the respondent, and hence, the time limit specified under clause (e) of paragraph 3(III) of the notification cannot be made applicable in those cases where refund of service tax distributed by the respondent's input service distributor office is concerned. The Commissioner (Appeals) was also of the view that the word 'shall' used in clause (e) of paragraph 3(III) of the notification casts an obligation on the adjudicating authority to condone the delay and that the notification does not prescribe Page 5 of 34

C/TAXAP/740/2019 JUDGMENT any condition for condoning the delay, and hence, if the adjudicating authority has sanctioned the refund, it tantamounts to having condoned the delay. He, further found that there was no dispute that the input service distributor office had distributed service tax to SEZ unit in terms of rule 7 of the CC Rules and held that since there is no time limit prescribed under the said rule to distribute cenvat credit by the input service distributor; and for the reason that the time limit of one year from the end of the month in which payment of service tax is made cannot be applied in such case, the respondent is entitled to the refund of the service tax. 3.4 The revenue carried the matter in further appeal before the Tribunal but did not succeed. 4. Mr. Parth Bhatt, learned Senior Standing Counsel for the appellant, submitted that the ISD invoice is not a taxpaying document. Therefore, the finding that the period of one year has to be calculated from the date of ISD invoice is not in consonance with clause (e) of paragraph 3(III) of Notification No.12/2014-Service Tax dated 01.07.2013 and rule 7 of the CC Rules. It was submitted that while the ISD invoice relates to the period 2014 to 2016, refund is claimed in this quarter. 4.1 Reference was made to clause (d) of rule 7 of the CC Rules which provides that the credit of service tax attributable as input service to all units shall be distributed to all the units pro rata on the basis of the turnover of such units during the relevant period to the total turnover of all the units, which are operational in the current year, during the said relevant period. Page 6 of 34

C/TAXAP/740/2019 JUDGMENT The attention of the court was invited to the Explanation to rule 7 of the CC Rules, which reads thus: “Explanation 3.- for the purposes of this rule, the relevant period shall be- (a) if the assessee has turnover in the financial year preceding to the year during which credit is to distributed for month or quarter, as the case may be, the said financial year; or (b) If the assessee does not have turnover for some or all the units in the preceding financial year, the last quarter for which details of turnover of all the units are available, previous to the month or quarter for which the credit is to be distributed.” 4.2 It was contended that it was possible for the headquarters to issue ISD invoice for every month that it paid service tax. According to the learned counsel, the available turnover has to be taken into consideration and the ISD invoice has to be issued at the end of every month and no artificial distinction can be drawn. 4.3 It was argued that clause (e) of paragraph 3(III) of the above notification is a mandatory condition and there is no such relaxation for granting refund by considering the date of ISD invoice as the relevant date for filing refund within one year with respect to Table-II, Form A-4 of the refund claim. It was submitted that the input service distributor is an office of the manufacturer or provider of output service and not a separate entity. Clause (e) of para 3(III) provides for the actual payment of service tax to the registered service tax provider and the service providers are of the SEZ units and not the providers of service of input service distributor. Therefore, in Page 7 of 34

C/TAXAP/740/2019 JUDGMENT the facts of the present case, the relevant date of payment as per the provisions of Notification No.12/2013-Service Tax dated 01.07.2013 should be the actual payment by the SEZ Unit or input service distributor as the case may be to the registered service provider and not from the date of ISD invoice. It was emphatically argued that, as to when ISD invoice is received by the SEZ unit is an internal administrative matter of the respondent. Therefore, any delay on the part of the headquarter in issuing ISD invoices, is no ground for the respondent to contend that they received the ISD invoice late. 4.4 It was submitted that the Tribunal has created an artificial distinction between the refund claims under Table I and Table II, namely refund claims for service tax paid on taxable services received by the SEZ unit and used in authorised operations and refund claims for service tax paid on specified services which are not used exclusively for authorised operations in the SEZ. It was submitted that by such bifurcation, an artificial distinction is sought to be drawn that for the SEZ units, limitation commences from the day when they receive the ISD invoice. It was submitted that the refund claim was required to be filed within one year from the end of the month in which actual payment of service tax was made, whereas in the case of the respondent, the refund claim was made beyond the period of one year from the end of the month in which actual payment of service tax was made. 4.5 It was, accordingly, urged that the appeal deserves to be admitted on the questions as proposed by the appellant or as may be formulated by this court. Page 8 of 34

C/TAXAP/740/2019 JUDGMENT 5. On behalf of the respondent, Mr. Vipin Jain, learned counsel, invited the attention of the court to the contents of paragraph 9 of the impugned order passed by the Tribunal, to submit that there is no perversity in the finding of the Tribunal regarding the fact that rule 7 of the CC Rules does not provide for any limitation. The attention of the court was invited to sub- rule (1) rule 9 of the CC Rules, and more particularly clause (g) thereof, which reads thus: “9.(1) The cenvat credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the following documents, namely:- Xxxx

“(g) an invoice, bill or challan issued by an input service distributor under rule 4A of the Service Tax Rules, 1994.” It was submitted that, thus, an invoice issued by an input service distributor is in the nature of taxpaying document. 5.1 It was further submitted that clause (e) of paragraph 3(III) of Notification No.12/2013-Service Tax dated 01.07.2013, permits the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, as the case may, to extend the time for filing claim of refund. It was submitted that such permission does not have to be prior permission and such permission can be granted even while considering the refund claim. In support of such submission, the learned counsel placed reliance upon the decision of the Supreme Court in the case of LIC v. Escorts Ltd., (1986) 1 SCC 264, wherein, it has been held thus: Page 9 of 34

C/TAXAP/740/2019 JUDGMENT “62. We do not propose to refer to any dictionary to find out the meaning of the word “permission”, whether the word is comprehensive enough to include subsequent permission. We will only refer to what Sir Shah Sulaiman, C. J. said in Shakir Husain v. Chandoo Lal: "Ordinarily the difference between approval and permission is that in the first the act holds good until disapproved, while in the other case, it does not become effective until permission is obtained. But permission subsequently obtained may all the same validate the previous act." 63. We have already extracted Sec. 29(1) and we notice that the expression used is "general or special permission of the Reserve Bank of India" and that the expression is not qualified by the word "previous" or "prior". While we are conscious that the word "prior" or "previous" may be implied if the contextual situation or the object and design of the legislation demands it, we find no such compelling circumstances justifying reading any such implication into Sec. 29(1). On the other hand, the indications are all to the contrary. We find, on a perusal of the several, different sections of the very Act, that the Parliament has not been unmindful of the need to clearly express its intention by using the expression "previous permission" whenever it was thought that "previous permission" was necessary. In Secs. 27(1) and 30, we find that the expression “permission” is qualified by the word “previous” and in Sections 8(1), 8(2) and 31, the expression “general or special permission” is qualified by the word "previous", whereas in Sections 13(2), 19(1), 19(4), 20, 21(3), 24, 25, 28(1) and 29, the expressions “permission” and “general or special permission” remain unqualified. The distinction made by Parliament between permission simpliciter and previous permission in the several provisions of the same Act cannot be ignored or strained to be explained away by us. That is not the way to interpret statutes. The proper way is to give due weight to the use as well as the omission to use the qualifying words in different provisions of the Act. The significance of the use of the qualifying word in one provision and its non-use in another provision may not be disregarded. In our view, the Parliament deliberately avoided the qualifying word previous in Sec. 29(1) so as to invest the Reserve Bank of Page 10 of 34

C/TAXAP/740/2019 JUDGMENT India with a certain degree of elasticity in the matter of granting permission to non-resident companies to purchase shares in Indian companies. The object of the Foreign Exchange Regulation Act, as already explained by us, undoubtedly, is to earn, conserve, regulate and store foreign exchange. The entire scheme and design of the Act is directed towards that end. Originally the Foreign Exchange Regulation Act, 1947 was enacted as a temporary measure, but it was placed permanently on the Statute Book by the Amendment Act of 1957. The Statement of Objects and Reasons of the 1957 Amendment Act expressly stated, "India still continues to be short of foreign exchange and it is necessary to ensure that our foreign exchange resources are conserved in the national interest." In 1973, the old Act was repealed and replaced by the Foreign Exchange Regulation Act, 1973, the long title of which reads: "An Act to consolidate and amend the law regulating certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency and bullion, for the conservation of foreign exchange resources of the country and the proper utilisation thereof in the interest of the economic development of the country ". We have already referred to Section 76 which emphasises that every permission or licence granted by the Central Government or the Reserve Bank of India should be animated by a desire to conserve the foreign exchange resources of the country. The Foreign Exchange Regulation Act is, therefore, clearly a statute enacted in the national economic interest. When construing statutes enacted in the national interest, we have necessarily to take the broad factual situations contemplated by the Act and interpret its provisions so as to advance and not to thwart the particular national interest whose advancement is proposed by the legislation. Traditional norms of statutory interpretation must yield to broader notions of the national interest. If the legislation is viewed and construed from that perspective, as indeed it is imperative that we do, we find no difficulty in interpreting permission to mean “permission”, previous or subsequent, and we find no justification whatsoever for limiting the expression “permission” to “previous permission” only. In our view, what is necessary is that the permission of the Reserve Bank of India should be obtained at some stage for the purchase of shares by Page 11 of 34

C/TAXAP/740/2019 JUDGMENT non-resident companies.” It was submitted that, therefore, prior permission for extending the period for filing the refund claim is not required. It was submitted that the Tribunal has considered all relevant aspect while upholding the order passed by the Commissioner (Appeals) and that the impugned order does not give rise to any question of law so as to warrant interference by this court. It was urged that the appeal being devoid of merits deserves to be dismissed. 6. Before adverting to the merits of the case, reference may be made to the findings recorded by the Tribunal in the impugned order. A perusal of the impugned order reveals that the Tribunal has found arguments regarding inapplicability of clause (e) to be convincing but was not inclined to deal with the same, as it did not find any infirmity in the adjudicating authority having granted refund by following the practice and precedence set by his predecessors. The Tribunal took note of the fact that earlier orders following same approach have been accepted by the revenue and was of the view that this was rightly so, as the refund claims in respect of services covered in Table-II of Form 4-A can be made by an SEZ unit only after the input service distributor in the DTA distributes the tax pertaining to invoices under which services common to the SEZ and DTA units have been received; and that it is only after the input service distributor issues the invoice distributing the tax credit, that the SEZ unit is made aware of the tax liability pertaining to such invoices, of which it can claim refund. 6.1 The Tribunal further noted that the order passed by the Page 12 of 34

C/TAXAP/740/2019 JUDGMENT adjudicating authority categorically records that the refund in cases covered by Table-lI of Form A-4 under Notification 12/2013 have been preferred within one year from the date of the lSD invoices issued in favour of the SEZ unit. In other words, the refund has been filed within one year from the earliest point of time that the SEZ unit became aware of the tax attributable in respect of the service rendered to it which were common to the authorised operations of the SEZ and in the DTA. The Tribunal noticed that clause (e) of paragraph 3(lll) of Notification No.12/2013-Service Tax dated 1st July, 2013 provides for discretion to the adjudicating authority to permit filing of refund claim even beyond one year from the end of the month in which actual payment of service tax was made by the SEZ unit to the registered service provider. The Tribunal was of the view that this discretion has been exercised by the adjudicating authority while granting refund in respect of cases covered under Table II of Form A-4 to the refund application, which was evident as the adjudicating authority in the order- in-original, had taken cognizance of the covering letter filed with the refund claim wherein it has been stated that in respect of cases where refund was being claimed after distribution of credit by the input service distributor there were some instances where on the date of filing of the refund claim the payment date to the service provider by the input service distributor office for common services was beyond one year from the date of such payment. The Tribunal has referred to the relevant disclosure made in the forwarding letter and has recorded that taking cognizance of the same, the adjudicating authority has while dealing with the refund claim in respect of cases covered by Table II of Notification No.12/2013, specifically recorded that the claims have been filed within one Page 13 of 34

C/TAXAP/740/2019 JUDGMENT year from the date of the ISD invoices issued to the SEZ unit. As against this, in respect of refunds covered by Table I of Form A-4 the adjudicating authority has recorded that the refund has been filed within one year from the end of the month in which actual payment of service tax has been made. The Tribunal was of the view that the fact that the adjudicating authority has taken due cognizance of the difference in the factual position qua cases covered under Table-I of Form A-4 vis-à-vis those covered under Table-II of Form A-4, clearly reflects that the adjudicating authority has after due application of mind by condoning the delay permitted the filing of the claim in respect of cases covered under Table-II, even beyond one year from the end of the month in which actual payment of service tax was made to the registered service provider. 6.2 The Tribunal has further held that clause (e) of paragraph 3(III) of Notification dated 01.07.2013 does not contemplate giving reasons for condoning the delay in filing refund claims. Even if the adjudicating authority has not exercised the jurisdiction vested in it of condoning the delay, there is no warrant to remand the matter as the Tribunal can exercise such discretion as it finds on facts that there is a reasonable cause for such delay inasmuch as, in case of ISD invoices for all purposes, be it cenvat or refund, the ISD invoice is deemed to be taxpaying document and the date of that ISD invoice has to be taken even for computing the one year stipulated in the notification. Therefore, as long as the SEZ unit files the claim for refund within one year from the input service distributor unit distributing credit to it, it is reasonable to condone the delay, if any, in filing the claim for refund from the time period Page 14 of 34

C/TAXAP/740/2019 JUDGMENT of one year from the end of the month in which tax payment is made to the service provider as envisaged in clause (e) of paragraph 3(lll) of the notification. According to the Tribunal, any other view would do violence to the objective with which the entire exemption mechanism by way of refund has been put in place inasmuch as the legislature has provided that there cannot be any tax incidence on any service which is used by an SEZ unit for undertaking its authorized operations, in line with which the Central Government has formulated a refund mechanism in respect of services which are common to both, DTA and SEZ units, and the earliest point of time when the SEZ unit can claim such refund is after the input service distributor has distributed the tax credit for which no time limit has been prescribed in rule 7 of the CC Rules. 6.3 The Tribunal has turned down the request to remand the matter for verification of the correctness of the distribution of credit made to the SEZ through ISD invoices as the revenue could not show what was incorrect with the claim of refund filed by the respondent; and was not in a position to justify the contention that the adjudicating authority had not applied its mind to clause (a) of the notification. 7. In the aforesaid backdrop, the questions proposed by the appellant may be examined. 8. The controversy raised vide proposed question (i) is whether the Tribunal was right in holding that mandatory time limit to file refund claims prescribed in clause (e) of paragraph 30(III) of Notification No. 12/2013-ST dated 01.07.2013, issued Page 15 of 34

C/TAXAP/740/2019 JUDGMENT by the Government of India, Ministry of Finance, Department of Revenue, is not applicable to the refund claims covered by Table-ll of Form A-4 of the said notification? In the opinion of this court, this question does not arise out of the impugned order, inasmuch as, the Tribunal, while finding the submission of the learned counsel for the respondent that, clause (e) does not apply to refund claims covered by Table-ll of Form A-4 of the said notification, to be convincing; has not dealt with this aspect in these proceedings as it did not find any infirmity in the adjudicating authority having granted refund by following the practice and precedence set by his predecessors. 9. Insofar as proposed question (iii) is concerned, the controversy raised is whether the Tribunal was right in holding that the adjudicating authority has exercised discretion to allow filing of refund claim beyond one year by the respondent, when the adjudicating authority had not recorded any reasons to condone such delay. It may be pertinent to note that while the adjudicating authority has not assigned any reasons for extending the period for filing the refund claim, the Tribunal was of the view that the adjudicating authority has, in fact, exercised discretion as it has taken cognizance of the disclosure in the covering letter filed along with the refund claim, wherein, it has been stated that in respect of cases where refund was being claimed after distribution of credit by ISD, there were some instances where on the date of filing of the refund claim, the payment date to the service provider by the ISD invoice of common services was beyond one year from the date of such payment. According to the Tribunal, the adjudicating authority was conscious of this fact which reflects application of mind to the factor of delay and shows that it has Page 16 of 34

C/TAXAP/740/2019 JUDGMENT condoned the delay in filing the refund applications covered by Table ll of Form A-4. In this regard, a perusal of the order passed by the adjudicating authority shows that there is no reference therein to the contents of the covering letter. However, in paragraph 13 of its order, the adjudicating authority has noted that the refund claim based on ISD invoices has been made within one year from the date of ISD invoices issued to the SEZ unit. Therefore, the adjudicating authority was conscious of the fact that the refund claim based on ISD invoices had been filed within a period of one year from the date when the ISD invoices were issued to the SEZ unit and not within one year from the date of actual payment. Having regard to the facts of the present case, wherein, it appears that in earlier cases relating to the respondent, the period for filing refund claims was extended where the refund claims under Table-II were filed within a period of one year from the date of issuance of invoice by the ISD; the revenue had accepted such orders and the adjudicating authority has followed this earlier practice, it may be that the earlier orders might contain reasons for extending the period for filing refund applications in case of refund claims falling under Table-II of Form A-4 and in the subsequent cases, the adjudicating authority might have simply adopted the practice without reiterating the reasons qua extending the period for filing refund claims. However, in the absence of any such facts coming on record, it is not clear, as to whether or not any previous order contains reasons for extending the period for filing refund claims. Be that as it may, considering the fact that the adjudicating authority was conscious about the fact that in case of refund claims falling under Table-II, some claims were filed beyond a period of one year from the date when the ISD Page 17 of 34

C/TAXAP/740/2019 JUDGMENT made actual payment to the registered service provider, it cannot be said that the view adopted by the Tribunal is not a plausible view so as to give rise to a question of law, much less, a substantial question of law. 10. The controversy raised vide proposed question (iv) is whether the Tribunal has the power or jurisdiction to condone the delay in filing the refund claim as per clause (e) of Para 3(lll) of Notification No. 12/2013-ST dated 01.07.2013, which is vested with the Assistant/Deputy Commissioner of Central Excise? On behalf of the appellant it has been contended that the discretion to extend the time is vested in the Assistant/Deputy Commissioner of Central Excise, and if such authority has not exercised its discretion, it is not permissible for the Tribunal to do so. In this regard, the learned counsel for the respondent placed reliance upon the decision of a Full Bench of the Madras High Court in State of Tamil Nadu v. Arulmurugan and Company, (1982) 51 STC 381 (FB). In that case the Full Bench was called upon to decide the question as to whether an appellate authority can entertain C form declarations filed by a registered dealer at the appellate stage, either under the Central Sales Tax Act, 1956, or the rules made thereunder. From 1st April, 1973, there is a statutory time limit for furnishing C form declarations. The time-limit is prescribed by rule 12(7) of the Central Sales Tax (Registration and Turnover) Rules, 1957. The source of this rule is to be found in the proviso to section 8(4) of the said Act, as amended with effect from 1st April, 1973. In terms of rule 12(7), C form shall be furnished “up to the time of assessment by the first assessing authority”. However, there is a provision for allowing Page 18 of 34

C/TAXAP/740/2019 JUDGMENT further time on sufficient cause, which is found in the proviso to section 8(4) of the said Act. It was the case of the revenue that with the completion of the assessment the time limit for filing C forms expires. The appellate authority comes on the scene only after the assessment is over. Under the relevant statutory provisions, an assessing authority alone can allow further time. The appellate authority is different from an assessing authority. Therefore, the appellate authority cannot allow further time and receive C forms at the appellate stage, subsequent to the assessment. The court did not accept the contention of the revenue that the appellate authority cannot be brought within the meaning of the expression “assessing authority”. The court held that in one sense, an appeal may be different from an assessment, but the difference lies only in the particular stage of the proceeding and in the particular authority having jurisdiction in the two stages. The court held thus: “...Basically, an appeal does not differ from an assessment. Just as is the case with any other appeal under our legal system, an appeal from a sales tax assessment is only a rehearing or a retrial. In the absence of any statutory inhibitions or restrictions, an appellate authority has precisely the same powers, exercisable in the same manner and to the same extent, as the assessing authority has, in the first instance. If this were not the position, no appellate authority can effectively function while hearing and determining an appeal from an assessment. Under the scheme of section 9 of the Central Sales Tax Act, appeals from Central sales tax assessments will have to be dealt with in the same manner and under the same procedure as provided for under the general sales tax law of the concerned State. The jurisdiction of an appellate authority under the Tamil Nadu General Sales Tax Act, 1959, includes the power to confirm reduce, enhance, or annul, the assessment. It also includes the power to set aside the assessment with a direction to the Page 19 of 34

C/TAXAP/740/2019 JUDGMENT assessing authority to make a fresh assessment, and also to pass any other order which the appellate authority may think fit. These powers, which are of the widest amplitude, are expressly conferred both on the Appellate Assistant Commissioner and on the Appellate Tribunal, vide sections 31 and 36 of the Tamil Nadu General Sales Tax, 1959. The provisions show clearly that the power of the appellate authority concerning an assessment under appeal is no different, and not less wide, than the power of the assessing authority to make the assessment in the first instance. Besides, such power as the appellate authority is empowered to exercise in relation to an assessment under appeal, has got to be exercised only in the same manner and subject to the same conditions, if any, which govern the exercise of the power of assessment by the assessing authority in the first instance. It follows, therefore, that whatever discretion is conferred on the assessing authority for purposes of assessment, must so be regarded, as a matter of statutory construction, to have been conferred on the appellate authority even without the concerned statutory provision expressly naming the appellate authority in that behalf. It goes without saying that an appellate authority, engaged as it is in precisely the same task under the fiscal statute as that of the assessing authority must also be possessed of like powers as those of the assessing authority. It is implicit in the very nature of the appellate jurisdiction, as well as the purposes for which that jurisdiction is created by the statute, that the appellate authority will have to function, in the very image of the assessing authority. Appellate proceedings are often truly described as an extension of the assessment proceedings, or as a continuation of the assessment proceedings. In this context, therefore, it does not matter that a power is conferred, by any provision in the taxing statute or in the statutory rules, eo nomine on the assessing authority, and is silent about the appellate authority or any other authority under the Act. Since the enabling section, or the rule, as the case may be, expressly refers to the assessing authority, as the repository of the power, it is elementary construction to hold that such power can be, and is intended to be, exercised by the assessing authority named in the particular provision concerned. But, it does not mean that the appellate authority and any other fiscal authority who are in seisin of the assessment, either in appeal, or in revision or in any other proceeding, cannot Page 20 of 34

C/TAXAP/740/2019 JUDGMENT exercise a like power. The fact that the appellate authority is not expressly mentioned in the provision conferring the enabling power, does not mean that the legislature intended to exclude that authority from the purview of the provision.” Thus, the court has held that whatever discretion is conferred on the assessing authority for purposes of assessment, must so be regarded, as a matter of statutory construction, to have been conferred on the appellate authority even without the concerned statutory provision expressly naming the appellate authority in that behalf. An appellate authority, engaged as it is in precisely the same task under the fiscal statute as that of the assessing authority must also be possessed of like powers as those of the assessing authority. 10.1 The learned counsel for the respondent also placed reliance upon the decision of the Supreme Court in Commissioner of Income Tax v. McMillan & Co., AIR 1958 SC 207, wherein, the court held thus: “10. The words “in the opinion of the Income Tax Officer” are not to be construed in the sense of a mere discretionary power; but in the context of the words used in the proviso to Section 13 they impose a statutory duty on the Income Tax Officer to examine in every case the method of accounting and to see (i) whether or not it is regularly employed, and (ii) to determine whether the income, profits and gains can properly be deduced therefrom. Section 30 of the Act gives the assessee a right of appeal in respect of certain orders including an order of assessment made under Section 23. Section 31 deals with the hearing of an appeal and powers of the Appellate Assistant Commissioner. Before disposing of the appeal, the Appellate Assistant Commissioner may, if Page 21 of 34

C/TAXAP/740/2019 JUDGMENT he thinks fit, make a further enquiry himself or cause it to be made by the Income Tax Officer, and in disposing of the appeal he may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; he may set it aside and order a fresh assessment. There is nothing in the language of Section 31 of the Act which imposes any restriction on the powers of an Appellate Assistant Commissioner so as to prevent him from exercising the power under the proviso to Section 13. The restriction, if any, must be inferred from the language of the proviso itself. It is contended that the use of the words “in the opinion of the Income Tax Officer” in the second part of the proviso to Section 13 suggests a complete elimination of the Appellate Assistant Commissioner’s jurisdiction to decide for the first time that the method of accounting is such that the income, profits and gains cannot be properly deduced therefrom. It is true that the decision as to the method of accounting is to be arrived at first by the Income Tax Officer after a careful scrutiny of the accounts whether they are simple or complicated, and the power is to be reasonably and judicially exercised, which excludes any subjective or arbitrary decision by the Income Tax Officer. It cannot, however, be said that a power so exercised is clothed with finality and would be excluded from review by the Appellate Assistant Commissioner; and in reviewing the order the Appellate Authority can exercise the same powers which the Income Tax Officer could exercise. Our attention has been drawn to the difference in language in which the two conditions for the application of the proviso have been expressed; the first condition is fulfilled if no method of accounting is regularly employed; the second condition, however, requires an opinion viz. the opinion of the Income Tax Officer that the income, profits and gains cannot be properly deduced from the method of accounting regularly employed. It is pointed out that the first condition involves an objective determination — not by any named authority but by any and every authority which may have to consider whether the condition as to the regularity of the method employed has been fulfilled or not; whereas the second condition involves a determination by a named authority. The argument is that by reason of the aforesaid difference in language, the legislature clearly intended that the opinion of no other officer can be substituted for the opinion of the Page 22 of 34

C/TAXAP/740/2019 JUDGMENT named authority viz. the Income Tax Officer, with regard to the fulfilment of the second condition; therefore, once the Income Tax Officer accepts the method of accounting as proper, the Appellate Assistant Commissioner has no jurisdiction to go behind that opinion. We are unable to accept this argument as correct. It is to be remembered that with regard to both conditions, the first and initial duty is that of the Income Tax Officer to determine whether the conditions or any of them are fulfilled; secondly, if the opinion of the Income Tax Officer with regard to the second condition is to be inviolate by reason of the difference in language, then it should be inviolate in all cases. Why should it be inviolate in one case and not so when the assessee appeals against a determination made adverse to him? We feel that the second condition is expressed in the terms in which it has been expressed, because it involves an inferential process and the expression “in the opinion of the Income Tax Officer” is aptly used as that officer must in the first instance make the determination. It does not necessarily follow that the Appellate Assistant Commissioner cannot revise the determination and exercise the power which the Income Tax Officer could exercise.” Thus, the Supreme Court has held that the appellate authority can exercise the power which the Income Tax Officer could exercise. 10.2 In the light of the principles enunciated in the above decisions, the powers of the appellate authority being an extension of the powers of the assessing authority, any order that could be passed by the assessing authority can be passed by the appellate authority. Under the circumstances, no infirmity can be found in the view of the Tribunal that if the adjudicating authority has not exercised the discretion to condone the delay, the Tribunal can exercise such discretion. 11. Insofar as proposed question (ii) is concerned, it does not Page 23 of 34

C/TAXAP/740/2019 JUDGMENT properly bring out the controversy in issue, but does give rise to substantial questions of law, hence, Admit. The following substantial questions of law arise for consideration: (A) Whether the Customs, Excise and Service Tax Tribunal was justified in holding that in case of ISD invoices, for all purposes, be it cenvat or refund, the ISD invoice is deemed to be taxpaying document, and hence, the date of that invoice has to be taken even for computing the one year stipulated in clause (e) of paragraph 3(III) of Notification No.12/2103-ST dated 1st July, 2013? (B) Whether the Customs, Excise and Service Tax Tribunal was justified in holding that no reasons are required to be assigned for extending the period for filing refund claims? 11.1 Since both the questions are intertwined, they are dealt with together. At this juncture, it may be germane to refer to certain statutory provisions. 11.2 Rule 2 of the CC Rules bears the heading “Definitions”. Clause (m) of rule 2 of the CC Rules defines “input service distributor” to mean, an office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider or an outsourced manufacturing unit, as the case may be. 11.3 In the facts of this case, “input service distributor" is an Page 24 of 34

C/TAXAP/740/2019 JUDGMENT office of the SEZ unit which is located in the DTA and receives invoices issued under rule 4A of the Service Tax Rules towards purchases of input services and issues invoice for the purpose of distributing credit of service tax paid on services to the SEZ unit. Thus, the input service distributor and the SEZ unit are not separate entities. 11.4 Sub-rule (1) of rule 4A of the Service Tax Rules, 1994 provides that every person providing taxable service, not later than thirty days from the date of completion of such taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier, shall issue an invoice, a bill, or as the case may be, a challan signed by such person or a person authorized by him in respect of such taxable service provided or agreed to be provided and such invoice, bill, or as the case may be, challan shall be serially numbered and shall contain the details enumerated thereunder. 11.5 Sub-rule (2) of rule 4A of the Service Tax Rules, 1994 provides that every input service distributor distributing credit of taxable services shall, in respect of credit distributed, issue an invoice, a bill or, as the case may be, a challan signed by such person or a person authorized by him, for each of the recipient of the credit distributed, and such invoice, bill, or as the case may be, challan shall be serially numbered and shall contain the following, namely: (i) The name, address and registration number of the person providing input services and the serial number and date of invoice, bill, or as the case may be, challan Page 25 of 34

C/TAXAP/740/2019 JUDGMENT issued under sub-rule (1); (ii) The name and address of the said input service distributor; (iii) The name and address of the recipient of the credit distributed; (iv) The amount of credit distributed. 11.6 Thus, under sub-rule (1) of rule 4A of the Service Tax Rules, the input service distributor receives invoices issued by the service provider towards purchases of input services; and in turn, under sub-rule (2) of rule 4A, the input service distributor issues invoices for the purposes of distributing the credit of service tax paid on the such services to each of the recipients of the credit distributed. 11.7 Rule 7 of the CC Rules provides for the manner of distribution of credit by input service distributor and reads as under: “7. The input service distributor shall distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or unit providing output service or an outsourced manufacturing units, as defined in Explanation 4, subject to the following conditions namely:- (a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; (b) the credit of service tax attributable as input service to a particular unit shall be distributed only to that unit; Page 26 of 34

C/TAXAP/740/2019 JUDGMENT (c) the credit of service tax attributable as input service to more than one unit but no to all the units shall be distributed only amongst such units to which the input service is attributable and such distribution shall be pro rata on the basis of all such turnover of such units, during the relevant period, to the total turnover of all such units to which such input service is attributable and which are operational in the current year, during the said relevant period; (d) the credit of service tax attributable as input service to all the units shall be distributed to all the units pro rata on the basis of the turnover of such units during the relevant period to the total turnover of all the units, which are operational in the current year, during the said relevant period; (e) outsourced manufacturing unit shall maintain separate account for input service credit received from each of the input service distributors and shall use it only for payment of duty on goods manufactured for the input service distributor concerned; (f) credit of service tax paid on input services, available with the input service distributor, as on the 31st of March, 2016, shall not be transferred to any outsourced manufacturing unit and such credit shall be distributed amongst the units excluding the outsourced manufacturing units. Explanation.-The provision of this clause shall, mutatis-mutandis, apply to any outsourced manufacturer commencing production of goods on or after the 1st of April, 2016; (g) provisions of rule 6 shall apply to the units manufacturing goods or provider of output service and shall not apply to the input service distributor. Explanation 1.- For the purposes of this rule, "unit" includes the premises of a provider of output service or the premises of a manufacturer including the factory, whether registered or otherwise or the premises of an outsourced manufacturing unit. Explanation 2.–For the purposes of this rule, the Page 27 of 34

C/TAXAP/740/2019 JUDGMENT total turnover shall be determined in the same manner as determined under rule 5: Provided that the turnover of an outsourced manufacturing unit shall be the turnover of goods manufactured by such outsourced manufacturing unit for the input service distributor. Explanation 3.– For the purposes of this rule, the 'relevant period‘ shall be,- (a) if the assessee has turnover in the 'financial year‘ preceding to the year during which credit is to be distributed for month or quarter, as the case maybe, the said financial year; or; (b) if the assessee does not have turn over for some or all the units in the preceding financial year, the last quarter for which details of turnover of all the units are available, previous to the month or quarter for which credit is to be distributed....” 11.8 On a plain reading of rule 7 of the CC Rules, it is evident that the same only provides for the manner of distribution of credit by the input service distributor and does not provide for any period of limitation for distribution of credit. 11.9 Rule 9 of the CC Rules bears the heading, 'Documents and accounts'. Sub-rule (1) thereof provides that the CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of the documents enumerated thereunder. Clause (g) of sub-rule (1) of rule 9, which is relevant for the present purpose, reads as under: “(g) an invoice, a bill or challan issued by an input service distributor under rule 4A of the Service Tax Rules, 1994.” Page 28 of 34

C/TAXAP/740/2019 JUDGMENT 11.10 Thus, on a conjoint reading of rules 7 and 9 of the CC Rules, it emerges that the input service distributor has to distribute the CENVAT credit in respect of service tax paid on input service to its manufacturing units whether in the DTA or the SEZ; and in terms of rule 9 of the said rules, the concerned unit which in the present case is an SEZ unit, is entitled to take CENVAT credit on the basis of an invoice issued by the input service distributor under rule 4A of the Service Tax Rules. Therefore, an invoice issued by the input service distributor is proof of payment having been made to the service provider and can be said to be a taxpaying document. However, while such document is proof of payment of tax, the date which such document bears is not the date of actual payment of service tax as contemplated in clause (e) of paragraph 3(III) of Notification No.12/2013-ST dated 01.07.2013. 11.11 Clause (e) of paragraph 3(III) of Notification No. 12/2013-ST dated 01.07.2013, postulates that the claim for refund shall be filed within one year from the end of the month in which actual payment of service tax was made by such Developer or SEZ Unit to the registered service provider or such extended period as the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may, shall permit. 11.12 Therefore, clause (e) provides for a time limit for filing a claim of refund, that is, within one year from the end of the month in which actual payment of service tax was made by the SEZ unit to the registered service provider. However, in case of refund claims falling under Table-II of Form A-4, payment of service tax to the registered service provider is Page 29 of 34

C/TAXAP/740/2019 JUDGMENT made by the input service distributor and not the SEZ unit. However, since the expression employed in clause (e) is, “the month in which actual payment of service tax was made”, therefore, in cases falling under Table-II of Form A-4, the claim for refund would be required to be made within one year from the end of the month in which actual payment of service tax was made by the input service distributor to the service provider and not one year from the end of the month in which the ISD invoices were issued. 11.13 At the cost of repetition, it may be noted that the Tribunal, in the impugned order, has held that as the refund in respect of services covered in Table-II of Form A-4 can be preferred by the SEZ unit only after the input service distributor in the DTA distributes the tax pertaining to invoices under which services common to the SEZ and DTA units have been received, the approach, adopted by the adjudicating authority is correct. The Tribunal has further noticed that it is only after the input service distributor issues the invoice distributing the tax credit, that the SEZ unit is made aware of the tax liability pertaining to such invoices of which, it can claim refund. The Tribunal has further observed that, it is an undisputed position that the legislature has provided that there cannot be any tax incidence on any service which is used by an SEZ unit for undertaking its authorized operations. In line with its objective, the Central Government has formulated a refund mechanism in respect of services which are common to both the DTA unit and the SEZ. Qua such services, which are common to the SEZ unit and DTA unit, the earliest point of time when the SEZ unit can claim such refund is after the input service distributor has distributed the tax credit for which, Page 30 of 34

C/TAXAP/740/2019 JUDGMENT incidentally there is no time limit prescribed in the rule 7 of the Cenvat Credit Rules. The Tribunal was of the clear view that in case of ISD invoices for all the purposes, be it cenvat or refund, the ISD invoice is deemed to be tax paying document, and hence, the date of that ISD invoice has to be taken even for computing the one year stipulated in the notification. Therefore, as long as the SEZ unit files the claim for refund within one year from the input service distributor unit distributing credit to it, it is reasonable to condone the delay, if any, in filing the claim for refund from the time period of one year from the end of the month, in which tax payment is made to the service provider as envisaged in clause (e) of paragraph 3(III). 11.14 As noticed earlier, the input service distributor is an office of the SEZ unit and, therefore, they are not separate entities. While rule 7 of the CC Rules may not provide for any time limit for distribution of credit, inasmuch as it only provides for the manner of distribution of credit; clause (e) of paragraph 3(III) of Notification No.12/2013-ST dated 01.07.2013 does provide for a limitation for filing refund claims. Therefore, the input service distributor is well aware that the SEZ unit is required to file the refund claim within a period of one year from the end of the month in which actual payment is made. Therefore, if the respondent desires to claim refund under clause (e) of paragraph 3(III) in respect of credit distributed to its SEZ unit, it is for the respondent to ensure that such credit is distributed within sufficient time so as to enable the SEZ unit to file the refund claim within the time provided therein. As rightly submitted by the learned Senior Standing Counsel for the appellant, distribution of credit is an internal administrative Page 31 of 34

C/TAXAP/740/2019 JUDGMENT matter of the SEZ unit and the input service distributor and they have to manage their affairs in a manner whereby, the refund claims can be made within the prescribed time limit. The Tribunal was, therefore, not justified in holding that the date of the ISD invoice has to be taken for computing the one year stipulated in the notification. While this may be a good ground for extending the period for filing the refund claim, there cannot be an absolute proposition that in all cases where the refund claim is filed within a period of one year from the end of the month in which the ISD invoice is issued, the period for filing refund claim has to be extended as the same would amount to reading into clause (e) of paragraph 3(III) of Notification No.12/2013-ST dated 01.07.2013 something that the authority which issued the notification did not intend. 11.15 The learned Senior Standing Counsel for the appellant has submitted that in some cases, the ISD invoices have been issued in respect of payment made more than two years ago. If that be so, such delay in issuing ISD invoices is required to be explained and the SEZ unit is required to request the Assistant Commissioner or Deputy Commissioner, as the case may be, to extend the time for filing the refund claim. In the opinion of this court, the time limit for filing the refund claim cannot be extended in such a casual manner by adopting a thumb rule that in all cases, where refund claim is filed within a period of one year from the end of the month when the ISD invoice is issued, the refund claims have to be accepted. 11.16 Moreover, the order passed by the adjudicating authority has to reflect application of mind to the question of Page 32 of 34

C/TAXAP/740/2019 JUDGMENT delay and the order should also reflect the reasons as to why the adjudicating authority has thought it fit to extend the time limit for filing the refund claim. While clause (e) of paragraph 3(III) of Notification No.12/2013-ST dated 01.07.2013 vests discretion in the adjudicating authority to extend the period for filing refund claims, it also provides for a time limit for filing of such claims. Therefore, when a claim is not filed within the time provided, such claim can be processed only if the period for filing such claim is extended. Therefore, while accepting the belated refund claim, the adjudicating authority has to first consider the aspect of delay in making such claims and assign reasons for extending the period. When the provision vests discretion in the adjudicating authority, the order should reflect as to why such discretion has been exercised. It cannot be presumed that merely because the authority has processed the refund claim, it is deemed to have exercised its discretion. The court is, therefore, of the considered view that the Tribunal was not justified in holding that the adjudicating authority was not required to assign any reasons for condoning the delay in filing the refund claims. 11.17 In the light of the above discussion, it is held that the Customs, Excise and Service Tax Tribunal was not justified in holding that in case of ISD invoices, for all purposes, be it cenvat or refund, the ISD invoice is deemed to be taxpaying document, and hence, the date of that invoice has to be taken even for computing the one year stipulated in clause (e) of paragraph 3(III) of Notification No.12/2103-ST dated 1st July, 2013. It is further held that the Customs, Excise and Service Tax Tribunal was not justified in holding that no reasons are required to be assigned for extending the period for filing Page 33 of 34

C/TAXAP/740/2019 JUDGMENT refund claims. Both the above substantial questions of law stand answered accordingly, in favour of the appellant and against the respondent. 12. However, considering the fact that on facts, the Tribunal has found that the appellant has not been in a position to point out as to what is incorrect with the claim of refund filed by the respondent assessee; while not agreeing with the reasoning adopted by the Tribunal and answering the above questions in favour of the appellant, the court does not deem it fit to interfere with the impugned order to the extent it upholds the order of refund. 13. It is further clarified that this court has left the issue regarding applicability or otherwise of clause (e) of paragraph 3(III) of Notification No.12/2013-Service Tax dated 1st July, 2013 to refund claims made under Table-II of Form A-4 open, to be decided in an appropriate proceeding before the appropriate forum. It is further clarified that in case the issue with regard to the applicability or otherwise of clause (e) to refund claims made under Table-II of Form A-4 is raised by the respondent before the appropriate authority in future, the concerned authority shall decide the same in accordance with law, without in any manner being influenced by any observation made in this order. 14. The appeals are accordingly, disposed of in the aforesaid terms. [Harsha Devani, J.] [Sangeeta K. Vishen, J.] hiren Page 34 of 34