Service tax exemption for SEZ unit services upheld where the notification covered consumption within the Special Economic Zone.

Service tax exemption under Notification No. 4/2004-ST was held to extend to services provided to a unit in a Special Economic Zone for consumption within that area, not only to services rendered to a developer. The denial of exemption below was found to rest on an erroneous, piecemeal reading of the notification. As the service recipient was an SEZ unit and that status was not disputed, the notification conditions were satisfied and the exemption was admissible to the appellant.

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Issues: Whether service tax exemption under Notification No. 4/2004-ST dated 31.3.2004 was available to services provided to a unit in a Special Economic Zone.

Analysis: The notification was read as granting exemption not only for services provided to a developer of a Special Economic Zone but also for services provided to a unit in the Special Economic Zone for consumption within that location. The denial of the benefit below was held to have arisen from an erroneous and piecemeal construction of the notification. As the appellant was found to be providing the relevant service to a unit in the Special Economic Zone, and the authorities did not dispute that status, the conditions of the notification stood satisfied.

Conclusion: The exemption was held admissible to the appellant, and the issue was decided in favour of the assessee.

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