Service Tax Refund on Group Medical & Personal Accident Insurance Granted to SEZ Unit — CESTAT Bangalore
Background and Overview
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore, recently delivered a significant ruling in favour of a Special Economic Zone (SEZ) unit operating in the information technology sector. The case arose from the rejection of service tax refund claims pertaining to Group Medical Insurance and Personal Accident Insurance availed for employees and their family dependents during the financial periods April 2016 to June 2016 and January 2017 to March 2017. The refund claims had been filed under Notification No. 12/2013-ST dated 01.07.2013.
The Tribunal's ruling brings much-needed clarity on the scope of "General Insurance Business" as approved by the Development Commissioner and the extent to which SEZ units can claim service tax refunds without being subjected to restrictions imposed under the Cenvat Credit Rules, 2004.
Parties to the Dispute
Appellant: ANZ Support Services India Private Limited (SEZ Unit, engaged in export of IT-enabled services)
Respondent: Commissioner of Central Tax
Forum: CESTAT Bangalore
Appeals Against: Order-in-Appeal No. 582 & 583/2018-CT dated 11.02.2019 passed by the Commissioner of Central Tax (Appeals-II), Bangalore
Facts of the Case
ANZ Support Services India Private Limited, operating as an SEZ unit primarily exporting Information Technology enabled services, availed Group Medical Insurance and Personal Accident Insurance facilities for its workforce and their dependents. Service tax was duly paid by the assessee to the respective service providers on these insurance services.
The assessee subsequently filed refund claims seeking reimbursement of this service tax under Notification No. 12/2013-ST dated 01.07.2013, which provides exemption — by way of refund — for service tax paid on specified services received by an SEZ unit and used for authorised operations.
However, both the original authority and the first appellate authority rejected the refund claims. The primary grounds for rejection were:
- Ground 1: Group Medical Insurance and Personal Accident Insurance for employees and their dependents were not explicitly included in the list of input services approved by the Unit Approval Committee (UAC) of the Development Commissioner.
- Ground 2: Though "General Insurance Business" services had been approved by the Development Commissioner, the specific insurance services being claimed did not fall within that category as per the Revenue's interpretation.
Legal Provisions Under Examination
Notification No. 12/2013-ST dated 01.07.2013
The Tribunal examined Notification No. 12/2013-ST dated 01.07.2013 in detail. The notification, issued in exercise of powers conferred under sub-section (1) of section 93 of the Finance Act, 1994 read with sub-section (3) of section 95 of the Finance (No. 2) Act, 2004 and sub-section (3) of section 140 of the Finance Act, 2007, provides:
"...hereby exempts the services on which service tax is leviable under section 66B of the said Act, received by a unit located in a Special Economic Zone (hereinafter referred to as SEZ Unit) or Developer of SEZ (hereinafter referred to as the Developer) and used for the authorised operation from the whole of the service tax, education cess, and secondary and higher education cess leviable thereon."
The notification further provides that exemption shall be granted by way of refund of service tax paid on specified services received by the SEZ unit and used for authorised operations. It also permits an ab initio exemption from payment of service tax where such services are used exclusively for authorised operations.