SEZ service tax exemption supports full waiver of pre-deposit and stay of recovery for unit-linked services.

Services supplied to an SEZ unit for consumption within the SEZ can support a strong prima facie case against service tax liability where Rule 31 of the SEZ Rules, 2006 and the exemption for services supplied to a developer or unit of an SEZ apply. On that basis, the Tribunal granted full waiver of pre-deposit and stayed recovery of the impugned demand pending disposal of the appeal, including the service tax claimed on transportation of employees of SEZ units and related services.

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Issues: Whether the appellant had made out a prima facie case for waiver of pre-deposit and stay of recovery in respect of service tax demands relating to services rendered to SEZ units.

Analysis: The demand included service tax on transportation of employees of SEZ units and other related services. In view of Rule 31 of the Special Economic Zone Rules, 2006, framed under Section 26(1)(e) of the Special Economic Zones Act, 2005, and the exemption under Notification No. 4/2004-S.T. dated 31-3-2004 for taxable services supplied to a developer or unit of an SEZ for consumption within the SEZ, the appellant was found to have a strong prima facie case. Reliance was also placed on the Tribunal's earlier decision explaining the scope of the SEZ Act, the Rules, and the exemption notification.

Conclusion: Waiver of pre-deposit was granted in full and all proceedings for recovery of the impugned liability were stayed pending disposal of the appeal.

Ratio Decidendi: Services provided to an SEZ unit for consumption within the SEZ may justify waiver of pre-deposit and stay where the statutory SEZ framework and exemption notification prima facie support non-liability to service tax.

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