SEZ service exemption survives Form A-2 non-production where authorised operational use is undisputed; delayed-return fees remain statutorily capped.

SEZ exemption for taxable services supplied to an eligible SEZ unit for authorised operations cannot be denied solely because Form A-2 was not produced. Section 26 of the SEZ Act provides the substantive exemption, while Section 51 gives that framework overriding effect; a procedural condition imposed under the Finance Act cannot curtail the statutory benefit where authorised use is undisputed. Service-tax demand, interest and penalty are therefore not sustainable on that ground. Late fee for delayed ST-3 returns must also remain within the statutory ceiling under the Finance Act, 1994, requiring re-quantification of any excess levy.

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Issues: (i) Whether exemption for taxable services supplied to an SEZ unit for authorised operations can be denied solely for non-production of Form A-2; (ii) Whether late fee for delayed ST-3 returns may exceed the statutory ceiling.

Issue (i): Whether exemption for taxable services supplied to an SEZ unit for authorised operations can be denied solely for non-production of Form A-2.

Analysis: Section 26 of the Special Economic Zones Act confers substantive exemption for eligible supplies to an SEZ unit for authorised operations. Conditions regulating that exemption must arise under the SEZ statutory framework; a procedural requirement imposed through notifications issued under the Finance Act cannot curtail the statutory benefit. Section 51 gives the special enactment overriding effect. The services were undisputedly supplied to an SEZ unit and used for authorised operations, and no independent ineligibility was found.

Conclusion: Exemption cannot be denied merely because Form A-2 for the relevant financial year was not produced. The service-tax demand, interest and penalty are set aside in favour of the assessee.

Issue (ii): Whether late fee for delayed ST-3 returns may exceed the statutory ceiling.

Analysis: Section 70 of the Finance Act, 1994 limits late fee for delayed filing of ST-3 returns. Any amount levied beyond the ceiling applicable to the relevant period is impermissible and requires re-quantification.

Conclusion: The late fee must be confined to the legally permissible statutory limit, in favour of the assessee.

Final Conclusion: The SEZ exemption remains available where services were rendered to an eligible SEZ unit for authorised operations notwithstanding non-compliance with Form A-2, and any late fee must remain within the statutory cap.

Ratio Decidendi: A substantive SEZ exemption for services used in authorised operations cannot be defeated by a procedural Form A-2 requirement imposed outside the SEZ statutory framework; late fee is enforceable only up to the statutory maximum.

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