SEZ exemption prevails over inconsistent service tax notification, and binding appellate precedent must be followed in identical matters.

Service tax demand on transportation services supplied to an SEZ unit could not be sustained where the authority relied on an earlier Finance Act notification inconsistent with the exemption under the Special Economic Zones Act, 2005. Section 51 of the SEZ Act gives the Act overriding effect, so the section 26 exemption prevails over conflicting earlier notification-based treatment. The Tribunal also reiterated that an adjudicating authority must follow a binding appellate decision on identical facts and cannot ignore it merely because no further appeal was pursued. The demand order was set aside and the matter remanded for fresh adjudication under the correct statutory framework.

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Issues: Whether the service tax demand, interest and penalty for transportation services provided to a unit in a Special Economic Zone could stand despite the exemption under the Special Economic Zones Act, 2005 and the binding effect of an earlier tribunal decision.

Analysis: The Tribunal held that an adjudicating authority cannot disregard an earlier decision on identical facts on the ground that it was not pursued further in appeal. It reiterated that judicial discipline requires subordinate authorities to follow binding appellate decisions. It also found that section 51 of the Special Economic Zones Act, 2005 gives that enactment overriding effect, and that the exemption under section 26 of the Special Economic Zones Act, 2005 must prevail over an inconsistent notification issued earlier under the Finance Act regime. Since the impugned demand had been confirmed by relying on an outdated notification and the matter required reconsideration in the light of the SEZ exemption and settled law, the order could not be sustained.

Conclusion: The demand order was set aside and the matter was remanded to the original authority for fresh adjudication.

Final Conclusion: The appellant obtained relief by way of remand, and the tax demand was left for reconsideration by the original authority under the correct statutory framework.

Ratio Decidendi: An exemption under the Special Economic Zones Act, 2005 prevails over an inconsistent earlier notification, and subordinate authorities must follow binding appellate precedent in identical matters.

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