SEZ exemption for foreign agent commission prevails over service tax levy, while extended limitation fails absent suppression.

Commission paid by a Special Economic Zone unit to foreign agents for export sales was stated to fall within the SEZ exemption framework, with section 26 of the SEZ Act treated as a substantive exemption for authorised operations and section 51 giving the SEZ Act overriding effect over inconsistent levy provisions and procedural conditions under the service tax notifications. On that basis, the service tax demand was said to be unsustainable. The text also states that the extended limitation period under section 73(1) of the Finance Act, 1994 could not be invoked because the payments were recorded in the books and routed through permitted foreign exchange channels, leaving no fraud, suppression, wilful misstatement, or intent to evade.

---

---

Issues: (i) Whether commission paid to foreign agents for export sales, availed by a Special Economic Zone unit, was exempt from service tax under the SEZ framework notwithstanding reverse charge under the Finance Act, 1994 and the exemption notifications. (ii) Whether the extended period of limitation under section 73(1) of the Finance Act, 1994 was invocable on the facts of the case.

Issue (i): Whether commission paid to foreign agents for export sales, availed by a Special Economic Zone unit, was exempt from service tax under the SEZ framework notwithstanding reverse charge under the Finance Act, 1994 and the exemption notifications.

Analysis: The services were received by an SEZ unit for export-related activity and fell within the ambit of the exemption regime created by Notification No. 9/2009-ST and its amendment by Notification No. 15/2009-ST. More importantly, section 26 of the Special Economic Zones Act, 2005 conferred a substantive exemption for authorised operations, and section 51 gave the SEZ Act overriding effect over inconsistent provisions in other laws. The entitlement to SEZ exemption could not be defeated merely by procedural requirements under the exemption notifications.

Conclusion: The demand of service tax on the commission paid to foreign agents was not sustainable and the issue was decided in favour of the assessee.

Issue (ii): Whether the extended period of limitation under section 73(1) of the Finance Act, 1994 was invocable on the facts of the case.

Analysis: The payments were reflected in the books of account and were made through the permitted foreign exchange channel. On these facts, the ingredients necessary to invoke the extended limitation period, namely fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty, were absent.

Conclusion: The show cause notice was time-barred to the extent it invoked the extended period, and this issue was also decided in favour of the assessee.

Final Conclusion: The impugned demand and the orders confirming it were set aside, and the appeal succeeded on merits as well as on limitation.

Ratio Decidendi: For authorised operations of an SEZ unit, the SEZ Act confers a substantive exemption that prevails over inconsistent levy provisions and related procedural conditions, and the extended limitation period cannot be used absent the statutory ingredients of suppression or intent to evade.

---