Subcontractor providing services to SEZ unit entitled to exemption under Notification 9/2009-ST despite indirect service delivery

CESTAT Ahmedabad allowed the appeal, holding that a subcontractor providing services to a SEZ unit is entitled to exemption under Notification 9/2009-ST dated 03.03.2009. The tribunal ruled that when services are rendered to a SEZ unit through a formally authorized contractor, it makes no difference whether services are provided directly by the main contractor or through a subcontractor. The exemption benefit cannot be denied on procedural grounds when the substantive requirement of providing services to SEZ operations is met. The demand for service tax was set aside.

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Issues Involved:

1. Eligibility for exemption benefit u/s Notification No. 9/2009-ST for services provided by a subcontractor to a SEZ unit.
2. Requirement of furnishing declarations in Form A-1 and A-3 for availing exemption.
3. Applicability of service tax on services provided by subcontractors in SEZ.

Summary:

1. Eligibility for Exemption Benefit u/s Notification No. 9/2009-ST:

The appellant, a subcontractor, provided services to a SEZ unit and claimed exemption from service tax under Notification No. 9/2009-ST dated 03.03.2009. The Adjudicating Authority denied the exemption, arguing that it applies only to services provided directly by the main contractor to the SEZ unit. However, the Tribunal held that the exemption is available irrespective of whether the services are provided by the main contractor or a subcontractor, as long as the services are rendered to a SEZ unit. The Tribunal referenced various case laws, including *Shyam Engineers* and *Rishabh Construction Company*, supporting this view.

2. Requirement of Furnishing Declarations in Form A-1 and A-3:

The appellant contended that the requirement to furnish a declaration in Form A-1 was introduced by an amendment in Notification No. 9/2009-ST vide amendment No. 17/2011 dated 01.03.2011. Therefore, the demand for the period prior to March 2011 is unsustainable as there was no requirement for such a declaration before this date. The Tribunal agreed that substantive benefits provided by a notification cannot be denied due to procedural lapses.

3. Applicability of Service Tax on Services Provided by Subcontractors in SEZ:

The Tribunal emphasized that services provided in SEZ areas are exempt from service tax as per Section 26 of the SEZ Act, 2005. The Tribunal cited decisions in *Reliance Ports and Terminals Limited* and *DHL Lemuir Logistics Pvt. Limited*, which held that services provided in SEZ areas are exempt from service tax regardless of procedural compliance. The Tribunal concluded that the appellant, being a subcontractor, is entitled to the exemption as the services were provided to a SEZ unit.

Conclusion:

The Tribunal set aside the impugned order-in-original, allowing the appeal and confirming that the appellant is entitled to the exemption under Notification No. 9/2009-ST. The Tribunal reiterated that substantive benefits cannot be denied due to minor procedural lapses and that services provided in SEZ areas are exempt from service tax. The appeal was allowed, and the impugned order was declared without merit.

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