SEZ service tax exemption for CHA services applied where services were consumed within the zone despite procedural authorization issues.

Service tax exemption for CHA services rendered to SEZ units was treated as available where the services were consumed within the zone. Although an earlier notification referred to authorization by a committee headed by the Chief Commissioner, the record showed that no such committee had been constituted and the condition was later deleted in the successor notification. The Development Commissioner's clarification also supported exemption for services used inside the SEZ. On that basis, denial of exemption merely for non-compliance with the procedural authorization requirement was held unjustified, and the benefit was allowed.

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Issues: Whether Service Tax exemption under the relevant notifications was available for CHA services rendered to units in the Special Economic Zone despite the absence of authorization by the committee contemplated in the earlier notification.

Analysis: The services were rendered to units situated within the Special Economic Zone and were utilized within the zone. The earlier notification contained a requirement of authorization by a committee headed by the Chief Commissioner, but the material showed that such a committee had not been constituted and the condition was deleted in the successor notification. The clarification issued by the Development Commissioner also supported the view that the units in the zone were entitled to exemption when the service was consumed within the zone. In these circumstances, denial of exemption solely for non-compliance with the procedural authorization requirement was held to be unjustified.

Conclusion: The exemption was held admissible and the denial of benefit was set aside in favour of the assessee.

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