2019 (1) TMI 1180 - AT - Service Tax

Tribunal overturns tax demand for appellant's SEZ services due to procedural error

The tribunal ruled in favor of the appellant, holding that the denial of exemption and confirmation of the service tax demand due to non-furnishing of ... Benefit of N/N. 17/2011-ST dated 01.03.2011 - services consumed within SEZ - denial of benefit on the ground that appellant did not furnish declaration in Form A-1 for claiming the benefit of exemption in terms of the Notification - whether the denial of substantial relief be made for non-compliance with a procedure? - Held that:- The issue of providing service and the service being consumed at SEZ is not in dispute and it is also undisputed that the service recipient viz. M/s. Perlos closed down its business and hence, Form A1 could never be obtained and hence non-furnishing of Form A1 is not deliberate, which was beyond the control of the appellant. The Hon’ble Supreme Court in the case of Mangalore Chemicals & Fertilizers Ltd. Vs. DC [1991 (8) TMI 83 - SUPREME COURT OF INDIA] has clearly laid down that procedural infraction of notifications, circulars, etc. are condonable and would not coming in the way of extending substantial benefit, if otherwise found eligible - Similarly in the case on hand, it is not that the appellant had not rendered the service which was consumed in the SEZ, rather the denial is made for non-compliance with a procedural requirement which according to me is not correct, in the light of the decision of the Apex Court. Appeal allowed - decided in favor of appellant. Issues involved:Recovery of service tax under Notification No. 17/2011-ST for non-furnishing of Form A-1 for exemption claim.Analysis:The judgment pertains to a case where the Revenue sought to recover service tax from the assessee for not furnishing Form A-1 as required under Notification No. 17/2011-ST. The Revenue alleged that the assessee did not comply with the procedure for claiming exemption, leading to the denial of exemption and confirmation of the proposed demand. The assessee appealed the decision before the forum.During the hearing, both parties presented their arguments, and the tribunal considered the contentions, documents, and judgments referred to during the proceedings. The main issue revolved around whether substantial relief could be denied for non-compliance with a procedural requirement. It was established that the appellant provided services to a recipient in a Special Economic Zone (SEZ), where the services were consumed. The appellant's inability to obtain Form A1 due to the closure of the recipient's business was beyond their control.The tribunal referenced a Supreme Court case to highlight that procedural lapses should not hinder the extension of substantial benefits if the party is otherwise eligible. In this case, the appellant had indeed provided the services consumed in the SEZ, and the denial of exemption was solely due to non-compliance with a procedural requirement, which was deemed incorrect based on the Supreme Court's decision.Consequently, the tribunal concluded that the demand for service tax could not be sustained. Therefore, the impugned order and demand were set aside, and the appeal was allowed with any consequential benefits as per the law. The judgment was pronounced in open court on 23.01.2019.