TaxTMI 
TaxTMI 
2011 (6) TMI 394
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....pers by Sobha are treated as exempted services and not export of services. Several Show-Cause Notices were issued for different periods and after adjudication process, tax demands have been confirmed in all these cases. The details of which are tabulated below :- BANGALORE UNIT-SEZ No. Appeal No. Period SCN date OIO No./Date Demand (Rs.) 1. ST/569/08 04/2006 to 03/2007 SCN dated 12-10-2007 63/2008 dated 12-8-2008 1,66,78,662 2. ST/140/08 04/2007 to 03/2008 SCN dated 16-9-2008 126/2008 dated 25-11-2008 5,29,70,508 3. ST/831/09 04/2008 to 09/2008 SCN dated 8-12-2008 61/2009 dated 16-7-2009 4,19,44,094 4. ST/261/10 10/2008 to 03/2009 SCN dated 11-6-2009 103/2009 dated 29-9-2009 1,58,45,592 BOMMASANDRA UNIT-SEZ No. Appeal No. Period SCN date OIO No./Date Demand (Rs.) 1. ST/511/08 04/2006 to 03/2007 SCN dated 12-10-2007 62/2008 dated 15-7-2008 1,20,47,240 2. ST/141/08 04/2007 to 03/2008 SCN dated 16-9-2008 127/2008 dated 25-11-2008 1,09,28,979 3. ST/832/09 04/2008 to 09/2008 SCN dated 8-12-2008 62/2009 dated 16-7-2....
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.... exempted service. In all the impugned orders, the demands have been confirmed on the ground that the service was provided to SEZ units as exempted service and availment of input service credit would fall under the restrictions/demand under rule 6 of the Cenvat Credit Rules, 2004 as the case may be during the relevant period as detailed in table above. The following submissions as regards the provisions of SEZ Act, 2005 were made by the learned Counsel :- (i) The Government of India, enacted Special Economic Zone Act, 2005 (No. 28 of 2005) (SEZ Act) on 23-6-2005 which came into force w.e.f. 10-2-2006. (ii) By virtue of section 2(m)(ii) of the SEZ Act, 2005, the services rendered to an unit of the SEZ by a unit in the Domestic Tariff Area are treated as an export transaction. Section 2(m)(ii) is reproduced herein under: "2. In this Act, unless the context otherwise requires,-(m) "export" means - (i) taking goods, or providing services, out of India, from a Special Economic Zone, by land, sea or air or by any other mode, whether physical or otherwise; or (ii) supplying goods, or providing services, from the Domestic Tar....
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....sactions are entered into by a non-resident through the International Financial Services Centre; (g) exemption from the levy of taxes on the sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956 if such goods are meant to carry on the authorised operations by the Developer or entrepreneur. (2) The Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions, concessions, drawback or other benefits shall be granted to the Developer or entrepreneur under sub-section (1)." (v) The Rules framed under the SEZ Act, 2005 provide for procedures to be followed for supplying goods/services to SEZ units and to ensure that such goods and services are indeed used for or in relation to authorized operations. (vi) For instance rule 10 of the SEZ Rules, 2006 provides inter alia that the Developer or the Co-developer who has received the goods shall be responsible and liable for proper utilization of the goods. (vii) Similarly, rule 22 lays down detailed conditions based on which the exemption, drawbacks and concessions would be granted. (viii)Rule 25 in fact specifically....
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.... dated 31-3-2004 which was issued under section 93 of the Finance Act, 1994. Further, Export of services is governed by the Export of Services Rule, 2005. Sub-rule (2) of rule 3 of the said Rules specified the conditions for treating a taxable service as export of service, viz. : (a) Such service is provided from India and used outside India; and (b) Payment for such service is received by the service provider in convertible foreign exchange. Both the above conditions are not satisfied in this case and hence the services provided cannot be termed as export of service. It is also to submit that under section 26 of the SEZ Act, the units/developers in SEZ are specifically given exemption in respect of services received from the DTA. The learned Jt. CDR also submitted that Notification No. 4/2004 is deemed to have been issued under SEZ Act is not correct since Notification No. 4/2004 - Service Tax had been issued under section 93 of the Finance Act, 1994 and superseded by Notification No. 9/2009, dated 3-3-2009. Thus the Notification No. 4/2004 continued to be in operation till 3-3-2009. Accordingly it is to submit that there is no concept of deemed is....
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....rvice Rules, 2005 specifically provides that export of service means export of service outside India and SEZ developer is not covered in it; there is a specific exemption Notification No. 4/2004-S.T., dated 31-3-2004 which covers the whole of period of dispute before us and exemption Notification No. 4/2004-S.T., dated 31-3-2004 exempted the taxable service provided in relation to various operations in SEZ and received by a developer or a unit of SEZ. If we see, the provisions of rule 6 of Cenvat Credit Rules, 2004; Export of Service Rules, 2005; and Exemption Notification No. 4/2004-S.T., it would be clear that for the purpose of Cenvat Credit Rules and for the purpose of levy of Service Tax what was provided to SEZ developer is an exemption. The Export of Service Rules clearly show that export for the purpose of service tax is export outside India. A submission was made that section 51 of SEZ Act overrides the provisions of all other acts wherever there is a conflict. In fact in these cases, there is no conflict at all since it is not a contention of the Department that service tax to be paid in respect of service exported to SEZ or provided to SEZ developer. In the absence....
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....option. The Hon'ble High Court held that no export duty was leviable since what was to be applied for levy of export duty was the definition of "export" under Customs Act and not definition of "export" under SEZ Act. In fact, the learned Jt. CDR relied upon the same decision to submit that for the purpose of each enactment, the definition in the concerned enactment has to be applied and not the definition in the SEZ Act. Further, it was also submitted that in this case export of service has been clearly defined in the Export of Service Rules itself. Further the learned Jt. CDR also submitted that export is a legal fiction created under SEZ Act and fiction cannot be read into to another enactment. If there is conflict between SEZ Act and other enactments relating to SEZ units or developer, the provisions of SEZ Act may be applicable. In this case, the dispute is regarding application of provisions of Cenvat Credit Rules to domestic unit/domestic service provider and the fact that the service has been provided to SEZ developer does not mean that SEZ Act becomes applicable and provisions of Finance Act, 1994, rules thereunder and Central Excise Act, 1944 and rules thereunder would not....
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....r. Supply to the developer has to be tax-free in terms of provisions of SEZ Act and therefore in terms of provisions of section 51 of SEZ Act whenever there is a conflict, SEZ Act prevail and therefore the appellant's contention that the services are tax-free has not been denied and not even subject of dispute. What is in dispute is the provisions of Cenvat Credit Rules and Export of Service Rules and as already held by us, there was no conflict. 11. Another submission was made that there is conflict in meaning of "export' as per SEZ Act, 2005 and Export of Service Rules, 2005 and therefore, the provisions of section 51 of SEZ Act which reads as under shall prevail. "Section 51. Act to have overriding effect.-(1) The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act." In this regard, we find that the submission of Jt. CDR that there is absolutely no inconsistency between SEZ Act and Finance Act, 1994 and Cenvat Credit Rules, 2004 is correct. As submitted by him, section 26 of the SEZ Act has made provision....
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....Rules which is similar to the provisions of Cenvat Credit Rules. Further, the Larger Bench of the Tribunal in the case of Sterlite Industries (I) Ltd. v. CCE 2005 (183) ELT 353 (Trib. - L.B.), affirmed this view. The view of the Larger Bench in the case of Sterlite Industries (I.) Ltd. (supra) has been upheld by the Hon'ble High Court of Bombay as 2009 (244) ELT A89 (Bom.). We have considered the submissions. We find that the decisions of the Tribunal in the case of Bajaj Tempo Ltd. (supra) and Sterlite Industries (I) Ltd. (supra) are squarely applicable to the present case. In this case also, the services are allowed to be provided to SEZ units/developers subject to conditions which are required to be fulfilled by SEZ developer/unit. This is similar to erstwhile Chapter X Procedure in Central Excise Rules, 1944 which was a subject-matter in the case of Bajaj Tempo Ltd. (supra) which considered the Notification No. 217/86, dated 2-4-1986. In Sterlite Industries (I) Ltd.'s case (supra) the Tribunal was considering the provisions of Notification No. 214/86 in which the goods are allowed to be cleared without payment of duty by job worker subject to conditions which are required....
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.... in rule 57C. But in the case of Notification 217/86, the final products manufactured out of inputs are required to suffer duty and hence the chain of credit is extended up to the stage of final product, which is to be cleared on payment of duty. This is what emerges from a combined reading of Notification 217/86 and rule 57C. ** ** ** 7.6 Hence, the scope of rule 57C in a situation like the present one, is to be construed in the context of the Modvat scheme and not to destroy that concept. Any interpretation in such a situation has to be to give effect to Notification 217/86 and not to take away the benefit of averting duty payment at each stage in the line of production. Hence, a mechanical application of rule 57C, is to be avoided, since it destroys the very benefit, which is otherwise available under the scheme right from stage one to the final stage. In the case of disintegrated production, credit is available from stage one by paying duty at each finished stage and taking credit of such duty in the other units down the line, whereas in the case of vertically integrated production units the same benefit is sought to be conferred by averting payment of duty at each ....
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....ds, but ultimately gets paid at the manufacturer's end. In these circumstances, we are in agreement with the decision rendered in the case of Bajaj Tempo and Jindal Polymers. 4. In only case of Escorts Ltd. v. CC Ex, Delhi [2003 (160) ELT 623 (Trib.-Del.)] while interpreting rule 57C of the Central Excise Rules, the Tribunal rejected the appellants claim of Modvat credit of duty paid on the inputs used in the manufacture of the parts, which were cleared without payment of duty to, appellant's other unit under Chapter X procedure and utilised in the manufacture of tractor which were cleared on payment of duty by observing that since no duty was paid on the part at the time of clearance, rule 57C will apply and no Modvat credit would be admissible. However, the said decision was subsequently reversed by the Supreme Court as reported in Escort v. C.C.Ex. [2004 (171) ELT 145 (SC)]. For appreciation, we reproduce paragraphs 8 & 9 of the said decision. "8. It is to be seen that the whole purpose of the Notification and the Rules is to streamlines the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. Rule 57D(....