SEZ service exemption for employee transport upheld; employee conveyance linked to SEZ operations was not denied relief.

Employee transport between residence and an SEZ workplace was treated as Rent-a-Cab Service because the activity involved conveyance only and had no element of tour planning or scheduling, so it was not Tour Operator Service. The appellant also qualified for exemption for services supplied to the SEZ unit, as the transport was integrally connected with the SEZ recipient's operations and was treated as consumed within the SEZ. The SEZ Act's exemption framework and its overriding effect under Section 51 prevailed over any inconsistent restrictive conditions in the notification, and the amended Notification No. 9/2009-ST did not defeat the benefit for the disputed period.

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Issues: (i) Whether the transportation of employees of an SEZ unit from their residence to the workplace was classifiable as Rent-a-Cab Service or Tour Operator Service; (ii) Whether the appellant was entitled to exemption under Notification No. 4/2004-ST dated 31.03.2004 for services provided to the SEZ unit.

Issue (i): Whether the transportation of employees of an SEZ unit from their residence to the workplace was classifiable as Rent-a-Cab Service or Tour Operator Service.

Analysis: The service consisted of transporting employees between their residence and workplace. There was no element of planning or scheduling of tours. The nature of the activity therefore answered to Rent-a-Cab Service and not Tour Operator Service.

Conclusion: The issue was decided in favour of the appellant.

Issue (ii): Whether the appellant was entitled to exemption under Notification No. 4/2004-ST dated 31.03.2004 for services provided to the SEZ unit.

Analysis: The notification referred to services consumed within the SEZ. The recipient was an SEZ unit, and the transportation arrangement facilitated movement of employees to the SEZ workplace. The service was treated as consumed within the SEZ notwithstanding that part of the movement occurred outside the zone. The entitlement was also supported by the overriding effect of the SEZ Act under Section 51, and by the exemption scheme under Section 26 of the SEZ Act. The amended position in Notification No. 9/2009-ST was not applicable to deprive the appellant of the benefit for the disputed period.

Conclusion: The appellant was entitled to the exemption.

Final Conclusion: The demand was unsustainable and the impugned order was set aside with consequential relief.

Ratio Decidendi: Services provided to an SEZ unit are eligible for exemption when they are integrally connected with the SEZ recipient's operations, and the special statutory regime of the SEZ Act prevails over inconsistent restrictive conditions in a notification.

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