SEZ service tax exemption for sub-contractors supported waiver of pre-deposit and stay of recovery pending appeal.

A sub-contractor claiming service tax exemption for services rendered in a Special Economic Zone was held to have made out a prima facie case for waiver of pre-deposit and stay of recovery. The notification was read as exempting services provided in an SEZ without distinguishing between a contractor and a sub-contractor, and the main contractor's certification supported the claim that the services were consumed in the SEZ. Whether the services formed part of authorised operations was left open for final hearing.

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Issues: Whether waiver of pre-deposit and stay of recovery should be granted where the appellant, as a sub-contractor, claimed exemption for services rendered in a Special Economic Zone under the relevant service tax notification.

Analysis: The appellant was shown to be a sub-contractor and the main contractor had certified that the services were consumed in a Special Economic Zone. The notification was read as granting exemption to services rendered in a Special Economic Zone without drawing any distinction between a contractor and a sub-contractor. Since there was no dispute that the services were rendered to an SEZ unit, a prima facie case for waiver of pre-deposit was made out. The question whether the services formed part of authorized operations was left for consideration at the time of final hearing.

Conclusion: Waiver of pre-deposit was granted and recovery was stayed till disposal of the appeal.

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