SEZ works contract exemption applies where procedural endorsement is impracticable and substantial compliance is otherwise shown.

A works contract executed in a Special Economic Zone may not be denied tax exemption merely because customs or SEZ endorsement on running invoices was impracticable where purchase-bill endorsement had already been obtained and the applicable procedural rule was substantially complied with. The text states that sections 21 and 22 of the Gujarat Special Economic Zone Act, 2004 prevent State tax on sale or purchase of goods within the SEZ area, so a contrary assessment based on rigid insistence on invoice endorsement cannot stand. The assessment is therefore to be modified and tax liability, with consequential interest and penalty, recomputed in line with the earlier binding ruling.

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Issues: Whether the petitioner was liable to be assessed to tax on works contract executed in a Special Economic Zone despite the binding earlier decision holding that endorsement on purchase bills was sufficient compliance and that the transaction was otherwise exempt within the SEZ area.

Analysis: The sole controversy was identical to an earlier decision of the Court. That decision held that, in the context of a works contract executed in an SEZ, the goods were used in the course of execution and invoices were raised only later, so endorsement of customs or SEZ authority on the running invoices was not feasible. On that basis, Rule 42(2A) was held not to be mandatory in a rigid manner where purchase-bill endorsement had already been obtained. The same decision further held that, in view of sections 21 and 22 of the Gujarat Special Economic Zone Act, 2004, State tax could not be levied on sale or purchase of goods within the SEZ area. Since the assessing authority had proceeded contrary to that binding position, the impugned assessment could not be sustained.

Conclusion: The assessment treating the petitioner's works contract executed in the SEZ area as taxable was set aside and the petitioner succeeded.

Final Conclusion: The assessment order was directed to be modified and the tax liability, along with consequential interest and penalty, was to be recomputed in accordance with the earlier binding ruling.

Ratio Decidendi: Where a works contract is executed in an SEZ and the governing SEZ provisions exempt State tax, rigid insistence on customs endorsement on invoices cannot defeat exemption when the factual nature of the contract makes such endorsement impracticable and the applicable rule is substantially complied with.

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