Exemption certification requirement cannot be enforced solely by non production of Form A1; statutory entitlement governs exemption.

Demand for service tax based solely on non production of Form A1 was held unsustainable: the tribunal applied the binding precedent which invalidated notification provisions that made production of Form A1/A2 a precondition for exemption and treated the SEZ statute as not prescribing such certificate as mandatory. The tribunal therefore found no legal basis to deny exemption to services provided to SEZ units on that ground and set aside the impugned demand, allowing the appeal and granting consequential reliefs as per law.

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Issues: (i) Whether the demand of service tax on services provided to SEZ units can be sustained solely on the ground that the service provider did not furnish Form A1 / documentary certificate; and whether Section 26(2) of the SEZ Act, 2005 or the relevant notifications prescribe furnishing of Form A1 as a mandatory condition for claiming exemption.

Analysis: The Tribunal examined the factual position that the appellant rendered services to SEZ units and that the lower authorities confirmed tax demand because Form A1 was not produced and conditions of the exemption notifications were held unmet. The Tribunal considered the legal framework comprising Section 26(2) of the SEZ Act, 2005 and the notifications regulating exemption to services to SEZ units (Notification No. 9/2009 ST as amended by Notification Nos. 15/2009 ST, 17/2011 ST, 40/2012 ST and 12/2013 ST). The Tribunal noted the judgment of the Telangana High Court in M/s GMR Aerospace Engineering Ltd. (upheld by the Supreme Court) which set aside the impugned notification provisions requiring Form A1/A2 and held that Section 26(2) of the SEZ Act, 2005 does not prescribe production of such certificate as a condition for exemption. Applying that binding precedent, the Tribunal found no legal basis to insist on Form A1 for denying exemption in the facts of the case and held the impugned demand unsustainable.

Conclusion: The demand of service tax confirmed by the lower authorities solely on the ground of non production of Form A1 is not sustainable; the appeal is allowed and the impugned order is set aside, with consequential reliefs as per law.

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