SEZ service tax exemption applies to subcontracted services consumed within the zone, not just direct contracts.

Service tax exemption under Notification No. 04/2004-ST applies where taxable services are rendered for consumption within a Special Economic Zone, even if the provider acts as a sub-contractor rather than contracting directly with the developer or unit. The decisive test is the location and end use of the service, not the contractual chain. On the facts, the services were provided in relation to SEZ operations and consumed within the SEZ, so the exemption was available and denial of benefit was unsustainable. Prior tribunal decisions treating subcontracted SEZ-linked services as eligible were followed, and the demand was set aside.

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Issues: Whether service tax exemption under Notification No. 04/2004-ST was available where the appellant, acting as a sub-contractor, provided services for use in a Special Economic Zone.

Analysis: The exemption notification covers taxable services provided to a developer or a unit of a Special Economic Zone for consumption within the Special Economic Zone. The decisive factor is not whether the service provider is directly engaged by the SEZ developer or unit, but whether the service is rendered for and consumed within the SEZ. On the facts, the services were undisputedly provided in relation to SEZ operations and consumed in the SEZ. The issue was treated as already settled by prior tribunal decisions holding that subcontracted services used within the SEZ remain eligible for the exemption.

Conclusion: The appellant was entitled to the exemption and the denial of benefit was unsustainable.

Final Conclusion: The demand was set aside and the appeal succeeded on the question of SEZ-linked exemption for subcontracted services.

Ratio Decidendi: Where taxable services are rendered for consumption within a Special Economic Zone, exemption is available under the SEZ service-tax notification notwithstanding that the provider acted as a sub-contractor rather than contracting directly with the SEZ developer or unit.

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