SEZ service tax exemption for authorised operations supported waiver of pre-deposit and stay of recovery.

Service tax exemption for import/export cargo clearance services supplied to a Special Economic Zone unit was treated as prima facie available under Section 26(1)(e) of the Special Economic Zones Act, 2005 for authorised operations. The Department's argument that the notification limited exemption to services consumed within the SEZ did not displace that prima facie statutory position at the stay stage. On that basis, pre-deposit was waived and recovery was stayed pending appeal.

---

---

Issues: Whether the applicants were entitled to waiver of pre-deposit and stay of recovery in respect of the service tax demand raised on import/export cargo clearance services provided to a unit in a Special Economic Zone, in view of the exemption under the Special Economic Zones Act, 2005 and the relevant notification.

Analysis: The demand related to denial of service tax exemption for services provided to a Special Economic Zone unit during the relevant period. The applicants showed a strong prima facie case because the services were provided to a SEZ unit carrying on authorised operations, and the language of Section 26(1)(e) of the Special Economic Zones Act, 2005 supported exemption from service tax on taxable services provided to a developer or unit for authorised operations. The Department's reliance on the notification as limiting exemption to services consumed within the SEZ did not displace the prima facie effect of the statutory provision at this stage.

Outcome: Requirement of pre-deposit was dispensed with and recovery was stayed pending the appeal.

---