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Issues: Whether rent-a-cab services provided to a Special Economic Zone unit were entitled to exemption and whether the exemption could be denied on the basis that the services were not used wholly within the SEZ area.
Analysis: The exemption notification under the Finance Act, 1994 was read along with section 26(1)(e) of the Special Economic Zones Act, 2005, which grants exemption for taxable services provided to a Developer or Unit for authorised operations in a Special Economic Zone. Section 51 of the SEZ Act gives the special enactment overriding effect over any inconsistent law. On that basis, the condition in the exemption notification requiring use within the SEZ area could not control or restrict the statutory exemption available under the SEZ Act. Since the demand itself failed on merits, the question of extended limitation did not survive for determination.
Conclusion: The exemption could not be denied on the ground that the service was not used wholly within the SEZ area, and the demand was unsustainable.
Final Conclusion: The order confirming the service tax demand was set aside and the appeal succeeded with consequential relief.
Ratio Decidendi: Where a special statute grants exemption for services provided for authorised operations in an SEZ, the overriding effect of that statute prevails over a contrary condition in a general exemption notification issued under another enactment.
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