Special Economic Zone service tax exemption issue leads to waiver of pre-deposit and stay of recovery

Interim relief was sought against a service tax demand relating to alleged information technology services used in a Special Economic Zone. Applying the earlier Tribunal view that Notification No. 4/2004-ST covered taxable services consumed by a developer or unit in a Special Economic Zone for use within the zone, and noting the amount already deposited, the Tribunal held that no further pre-deposit was required at that stage. Waiver of pre-deposit of the balance tax, interest and penalty was granted, and recovery was stayed pending disposal of the appeal.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of recovery in respect of the service tax demand arising from alleged receipt of information technology services for use in a Special Economic Zone.

Analysis: The appeal for interim relief was considered against the background of the earlier Tribunal view that Notification No. 4/2004-ST specifically extended to taxable services consumed by a developer or unit in a Special Economic Zone for such consumption within the zone. On that basis, and considering the amount already deposited, the balance demand was treated as not requiring further pre-deposit at that stage.

Conclusion: The appellant was granted waiver of pre-deposit of the balance tax, interest and penalty, and recovery was stayed till disposal of the appeal.

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