Developer providing signage services to SEZ units entitled to service tax exemption under SEZ Act Section 26 read with Rule 31

M/s. DLF Assets Pvt. Ltd. Versus Commissioner of CGST & Central Excise, Delhi East

M/s. DLF Assets Pvt. Ltd. Versus Commissioner of CGST & Central Excise, Delhi East - TMI Issues Involved:
1. Classification of signage income.
2. Eligibility for service tax exemption under SEZ Act and related notifications.
3. Validity of adjudicating authority's reliance on notifications over SEZ Act provisions.
4. Applicability of negative list provisions for service tax exemption.

Issue-wise Detailed Analysis:

1. Classification of Signage Income:
The appellant, M/s. DLF Assets Pvt. Ltd., classified signage income under 'Renting of Immovable Property Service' and claimed exemption from service tax. The department contended that the signage service should be classified under 'Advertisement Service' as per Section 65(105)(zzzm) of the Finance Act, 1994, which is not exempt under the relevant SEZ notifications.

2. Eligibility for Service Tax Exemption under SEZ Act and Related Notifications:
The appellant argued that the services provided to SEZ units are exempt under Section 26 of the SEZ Act, 2005, which overrides other laws due to Section 51 of the SEZ Act. The appellant cited previous favorable judgments, including their own case (2020 (11) TMI 35-CESTAT New Delhi), and argued that the exemption should be granted as per SEZ Act provisions, not limited by the conditions of Notification No. 09/2009-ST and Notification No. 17/2011-ST.

3. Validity of Adjudicating Authority's Reliance on Notifications Over SEZ Act Provisions:
The Tribunal noted that the SEZ Act and SEZ Rules have an overriding effect over other laws (Section 51 of SEZ Act). The Tribunal referred to the Andhra Pradesh High Court's judgment in GMR Aerospace Engineering Limited (2019 (8) TMI 748) and previous Tribunal decisions, which held that SEZ Act provisions for service tax exemption prevail over conflicting notifications. The Tribunal emphasized that the SEZ Act's statutory scheme grants exemptions to authorized operations in SEZs, and any conflicting notification conditions are invalid.

4. Applicability of Negative List Provisions for Service Tax Exemption:
The Tribunal observed that the classification-based levy ceased to exist post-2012 with the introduction of the negative list regime. Clause (g) of Section 66D exempts 'selling of space or time slot for advertisement other than advertisements broadcast by radio or television' from service tax. The Tribunal held that the appellant's activity falls under this exemption from 01.07.2012, not 01.10.2014 as contended by the adjudicating authority.

Conclusion:
The Tribunal concluded that the adjudicating authority's findings were contrary to the SEZ Act and Rules, and failed to follow judicial discipline by ignoring previous favorable decisions in the appellant's case. The order under challenge was set aside, and the appeal was allowed, affirming the appellant's entitlement to service tax exemption on signage income under the SEZ Act and related provisions.

[Order pronounced in the open Court on 12.07.2024]