SEZ service tax exemption applies to sub-contractor services where the work supports authorised operations and is consumed within the zone.

Services provided by a sub-contractor for authorised operations in a Special Economic Zone remain eligible for service tax exemption where they are rendered in relation to SEZ operations and consumed within the SEZ. The contractual route through a main contractor does not, by itself, defeat exemption if the statutory conditions in the exemption notifications are otherwise satisfied. The Tribunal relied on its earlier view in the appellant's own case and coordinate bench decisions to hold that the service must be tested by its SEZ nexus and consumption within the zone, not by the identity of the contracting intermediary. The service tax demand was therefore held unsustainable and exemption allowed.

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Issues: Whether services provided by a sub-contractor, on behalf of the main contractor, for authorized operations in a Special Economic Zone are eligible for exemption from service tax under the relevant exemption notifications.

Analysis: The exemption was denied only because the appellant acted as a sub-contractor and did not render the service directly to the SEZ unit. The recorded reasoning accepted that the decisive test is whether the service was rendered in relation to authorized operations in the SEZ and consumed within the SEZ, not whether it was routed through the main contractor. The Tribunal followed its earlier view in the appellant's own case and other co-ordinate bench decisions, holding that the contractual chain does not alter the character of the service where the statutory conditions for SEZ exemption are satisfied.

Conclusion: The service tax demand was not sustainable and the appellant was entitled to the exemption.

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