SEZ service tax exemption cannot be denied for missing Form A1 when Form A2 authorisation is available.

Service tax exemption for services supplied to SEZ units could not be denied merely because the service provider did not produce Form A1 when Form A2 issued by the jurisdictional officer was on record. The applicable exemption scheme granted ab initio exemption for specified services received by an SEZ unit or developer for authorised operations, subject to procedure. Since the services were admittedly rendered to SEZ units for authorised operations and Form A2 had been issued, the absence of Form A1 was only a procedural lapse. The exemption was therefore sustainable and the service tax demand, interest, and penalty were liable to be set aside.

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Issues: Whether the benefit of service tax exemption for services supplied to SEZ units could be denied merely because the service provider did not produce Form A1, when Form A2 issued by the jurisdictional officer was available on record.

Analysis: The exemption notification governing the relevant period provided for ab initio exemption where specified services were received by an SEZ unit or developer for authorised operations, subject to the prescribed procedure. Form A1 is the declaration furnished by the SEZ unit and Form A2 is the authorisation issued by the jurisdictional central excise officer on the basis of that declaration. The record showed that Form A2 had been issued by the jurisdictional officer and was available, and the services were admittedly rendered to SEZ units for authorised operations. In that setting, the absence of Form A1 with the appellant was treated as a procedural lapse that could not defeat the substantive exemption available on the strength of Form A2.

Conclusion: The denial of exemption for non-production of Form A1 was unsustainable, and the service tax demand, interest, and penalty were liable to be set aside.

Ratio Decidendi: Where the jurisdictional authorisation in Form A2 is available and the services are established to have been provided to an SEZ unit for authorised operations, the exemption cannot be denied solely for non-production of Form A1 by the service provider.

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