SEZ exemption for GTA services applies when goods movement supports authorised operations, despite services being availed outside the zone.

A Special Economic Zone unit's liability to service tax on GTA services used for movement of goods from the SEZ to the Domestic Tariff Area turned on the SEZ exemption framework and Notification No. 4/2004-ST. The Tribunal held that the unit was only a recipient of GTA services and, if liability arose, it would be under reverse charge, not as provider of the service. It further held that Section 26 of the SEZ Act exempts SEZ units from taxes and duties, and Section 51 gives that regime overriding effect, so exemption could not be denied merely because the services were availed outside the SEZ when they related to authorised operations. The demand, interest, and penalties were unsustainable.

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Issues: Whether service tax was payable on Goods Transport Agency services availed by a Special Economic Zone unit for movement of goods from the SEZ to the Domestic Tariff Area, and whether the exemption under the SEZ regime and Notification No. 4/2004-ST was available even though the services were availed outside the SEZ.

Analysis: The demand in the show cause notice proceeded on an assumption that the appellant had rendered GTA services, whereas the appellant had only availed such services as a recipient and was liable, if at all, only under reverse charge. The appellant was a Special Economic Zone unit, and the Tribunal held that Section 26 of the Special Economic Zones Act, 2005 grants exemption from taxes and duties to SEZ units, while Section 51 of the same Act gives overriding effect to the SEZ regime. Relying on earlier decisions, the Tribunal accepted that the phrase in Notification No. 4/2004-ST referring to consumption within the SEZ could not be read so restrictively as to deny exemption merely because the service was availed outside the SEZ, particularly when the services related to authorized operations of the SEZ unit.

Conclusion: The demand of service tax, interest, and penalties could not be sustained, and the exemption was held available to the SEZ unit.

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