TaxTMI 
TaxTMI 
2016 (6) TMI 1125
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....s Nokia India Pvt. Ltd., a unit in a Special Economic Zone, in connection with import and export of goods during the period from December 2005 to July 2007 and the taxability of surplus generated by advance booking of space for air freight. 2. During the period in dispute, the operations were being carried out by M/s Excel India Pvt. Ltd registered as a service-provider in Chennai and proceedings were initiated upon audit of assessee by that jurisdiction between 6th August 2007 and 8th August 2007. Having come under the name and style of M/s DHL Lemuir Logistics Pvt. Ltd and having obtained centralised registration on 24th November 2007, the jurisdiction shifted to Commissioner of Service Tax, Mumbai who issued the show cause notice dated 25th April 2008. 3. Before proceeding to consider the rival contentions on the demand relating to services rendered to Special Economic Zone entity, we take note of the manner in which the show cause notice has endeavoured to demand tax of Rs. 2,56,896/- for alleged rendition of 'business auxiliary service.' It would appear that the tax was liable on an amount of Rs. 20,98,826 being income that was formerly recorded in the books of a....
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....e observe that no effort has been taken to ascertain whether the said amount was a consideration, whether the airline was a client and whether any marketing had indeed been undertaken. A surmise has been followed by an even more bizarre justification of the brevity. And, in the pursuit of that brevity, a passing reference has been made to a show cause notice that has been adjudicated in a different corner of the country at some time in the past, which, purportedly, is sufficient elaboration of the present allegation against the assessee. There is probably no other more illustrative example of lack of diligence in establishing a charge against a noticee and of utter disregard for the principles of natural justice - issue of a notice which is deafeningly silent on the grounds for arriving at the allegation of evasion of tax. We wonder at the magnitude of material at the disposal of the adjudicating authority to be convinced that there was a contravention of Finance Act, 1994 of sufficient import to invoke the penal clause under section 78. Not surprisingly, the impugned order has not considered it necessary to render an independent finding and appears to have merely followed the earl....
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....ially, every such pre-booked slot is bought from the airline and sold to the consignor-clients. The two transactions are independent with no contact between the consignor and the airlines. It is the consignor who is the client of the appellant and not the airline. Space offered by the airlines is not being marked by the appellant, on the contrary, pre-booked space is sold to consignors by the appellant. 7. In the context of these contra transactions of specified space on the air carrier, we examine the taxable service and the definition thereto. The taxable service according to section 65(105)(zzb) of Finance Act, 1994 is that provided or agreed to be provided: to a client, by any person in relation to business auxiliary service.' and relevant extract or section 65(19) of Finance Act, 1994 defining 'business auxiliary service' is: 'any service in relation to xxxx (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the client; or (iii) procurement of goods or services, which are inputs for the client; or xxxx (v) provision of service on behalf of client; or xxxx an....
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....omic Zone Act, 2005, decisions of the Hon'ble High Court of Delhi in Jindal Stainless Steel & another v. Union of India [AIT-201-284-HC] which set aside circular dated 3rd April 2008 on the ground of inconsistency with the Special Economic Zones Act, 2005, and Federation of Indian Airlines v Union of India [WP (c) No 8004/2010] on the vires of subordinate legislation. Reliance was also placed on the decision of the Tribunal in Norasia Container Lines v Commissioner of Central Excise, New Delhi [2011 (23) STR 295 (Tri Del)] and Maersk India Pvt Ltd. v Commissioner of Service Tax, Chennai [2011 (23) STR 169 (Tri-Chennai)]. It was submitted the services rendered by the appellant are arrangement of transportation of goods to the airport and port with attendant documentation, clearance formalities and movement by road to the zone and that the matter under dispute hinges on the argument of Revenue that exemption under their notifications is restricted to services consumed in the Special Economic Zone. 10. Learned Authorized Representative reiterated the findings of the adjudicating authority, the contents of notification 4/2004-ST dated 31st March 2004 and the order of the Tribuna....
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.... tax leviable thereon under section 66 of the said Act, subject to the following conditions, namely:- (i) the developer has been approved by the Board of Approvals to develop, operate and maintain the Special Economic Zone; (ii) the unit of the Special Economic Zone has been approved by the Development Commissioner or Board of Approvals, as the case may be, to establish the unit in the Special Economic Zone; (iii) the developer or unit of a Special Economic Zone shall maintain proper account of receipt and utilisation of the said taxable services. Explanation.- For the purposes of this notification,- (1) "Board of Approvals" means the combined Board of Approvals for export oriented unit and Special Economic Zone units, as notified in the Official Gazette, from time to time by the Government of India in the Ministry of Commerce and Industry; (2) "developer" means a person engaged in development or operation or maintenance of Special Economic Zone, and also includes any person authorised for such purpose by any such developer; (3) "Special Economic Zone" means a zone specified as Special Economic Zone by the Central Government ....
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....ported out of the country, the mechanism for neutralization of all the indirect taxes incurred on the goods was extended to service tax also. 14. The exemptions that are accorded to Special Economic Zone entities are availed by the entity for imports, extended to suppliers of indigenous inputs by documentation and verification akin to export procedures. Services, being intangible and of much later vintage, has been a fertile ground for denial of tax neutralization by an over-cautious tax administration. The privilege of exemption that is available to Special Economic Zone entities depend, to a large extent, on the conviction on the part of the service provider that he will not burdened on a later date with the tax that was not collected from the zone entity. Considering the circumstances, it would take a brave commercial venture to take that risk; the appellant did so and is now facing the consequences. What is in contention here is not the tax burden visited upon the appellant but the denial of tax-exempt exports envisaged under the Special Economic Zone scheme owing to the intangibility of the target of taxation and unfamiliarity with the contours of this scheme. It would appe....
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.... with the evolution of these from 'bonded areas' to outside customs jurisdiction areas. 'Consequently, import duties were 'zero rated' and customs duties leviable, if, instead of exports, goods were cleared into the 'domestic tariff area'. The statutory status of these newly-designated 'special economic zones' stood on firmer ground. Exemption under section 25 of Customs Act, 1962, not being warranted any longer, were accordingly signed out of existence. The principle is unambiguously clear - exemptions accorded by legislative action do not require reinforcement under the exempting power of the Central Government. 17. The Special Economic Zones Act, 2005 was notified on 10th February 2006 to provide a legal framework for a self-contained, comprehensive and compact scheme to bring about industrial expansion without multiple supervisory jurisdictions. The legal fiction of 'outside the Customs territory' enabled exemptions from all indirect taxes to the extent that goods and services were required for performing 'authorised operations' which are production and export of goods or export of services. Consequently, goods produced and....
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....f the Finance (No. 2) Act, 2004 (23 of 2004) in case the taxable securities transactions 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 (74 of 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). The powers delegated to the Central Government to prescribe the manner and conditions of availment were exercised by issue of Special Economic Zones Rules, 2006. Rule 31 in as under: '31. The exemption from payment of service tax on taxable services under section 65 of the Finance Act, 1994 (32 of 1994) rendered to a Developer or a Unit (including a Unit under construction) by any service provider shall be available for the authorized operations in a Special economic Zone.' We note that, unlike the terms and con....
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....ry at that point in time to implement the popular will articulated in a statute of such import as the Special Economic Zones Act, 2005. An uninstructed tax mechanism that had no cause to acquiesce gracefully in exclusion of its jurisdiction by statutory mandate would well have required a diktat of some sort for the privilege of tax exemption to be accorded to the beneficiaries of parliamentary sanction. Exemption of duties was not only familiar from long years of practice under the predecessor schemes, by whatever name called, but also owing to its physical form, amenable to any check or verification. The very nature and manifestation of service transactions precluded the satisfaction of ascertainment of arrival at the intended destination. This lack of familiarity did justify some form of instruction under the authority of taxing statute. There is, however, no justification for resort to an exemption notification for achieving that end when the supreme legislative organ has, itself, legislated an exemption into effect. That errancy is all the more piquant when executive initiative, in exercise of delegated authority, seeks to constrain the unrestricted exemption legislated in sect....
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....39; That the provisions of this law prevail over others is also articulated by '51. (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 the event of a dispute, the legal position is not in doubt; the exemption in Special Economic Zones Act, 2005 will prevail. The objective of the Special Economic Zones Act, 2005 being the avoidance of any impediment to the operation of 'foreign exchange generating entities', the obligation to eliminate the scope for disputes is also binding on different departments of the Government of India. The Department of Revenue did not, apparently, foresee that the existing instruments issued under the general taxing statutes, such as Finance Act, 1994, that were not repealed by the newly enacted special law or on the initiative of the issuing department could well be invoked by tax officials, particularly when exemptions were saddled with conditions and restrictions which are not contemplated in the new special law. Those should have been rescinded and re....
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....on whereby the general law, to the extent dealt with by the special law, is impliedly repealed. This principle finds its origins in the latin maxim of generalia specialibus non derogant, i.e., general law yields to special law should they operate in the same field on same subject. 30. Generally, the principle has found vast application in cases of there being two statutes: general or specific with the latter treating the common subject matter more specifically or minutely than the former. Corpus Juris Secundum, 82 C.J.S. Statutes § 482 states that when construing a general and a specific statute pertaining to the same topic, it is necessary to consider the statutes as consistent with one another and such statutes therefore should be harmonized, if possible, with the objective of giving effect to a consistent legislative policy. On the other hand, where a general statute and a specific statute relating to the same subject. ......... 34. In J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. State of U.P., (1961) 3 SCR 185, this Court has clarified that not only does this rule of construction resolve the conflicts between the general provision in one statute and the specia....
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..... Bahadur, (1981) 1 SCC 315 this Court was confronted with the question as to whether the LIC Act is a special legislation or a general legislation and while considering the rule in discussion, this Court observed thus: "49. ...the legal maxim generalia specialibus non derogant is ordinarily attracted where there is a conflict between a special and a general statute and an argument of implied repeal is raised. Craies states the law correctly: "The general rule, that prior statutes are held to be repealed by implication by subsequent statutes if the two are repugnant, is said not to apply if the prior enactment is special and the subsequent enactment is general, the rule of law being, as stated by Lord Selbourne in Sewards v. Vera Cruz, 'that where there are general words in a later Act capable of reasonable and sensible application without extending them to subjects specially dealt with by earlier legislation, you are not to hold that earlier and special legislation indirectly repealed, altered, or derogated from merely by force of such general words, without any indication of a particular intention to do so. There is a well-known rule which has application to this case, ....
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....xcludes the applicability of the general ones. Once we come to the conclusion that intention of the legislation is to exclude the general provision then the rule "general provision should yield to special provision" is squarely attracted. 42. Having noticed the aforesaid, it could be concluded that the rule of statutory construction that the specific governs the general is not an absolute rule but is merely a strong indication of statutory meaning that can be overcome by textual indications that point in the other direction. This rule is particularly applicable where the legislature has enacted comprehensive scheme and has deliberately targeted specific problems with specific solutions. A subject specific provision relating to a specific, defined and descriptable subject is regarded as an exception to and would prevail over a general provision relating to a broad subject.' Guided by the enunciated principles, the Hon'ble Supreme Court held that the special law effectively repeals the general law and that special law prevails even where the general law may be more beneficial. The strictness of application of the special law is immutable. 22. There can, therefore, be....
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....nals will be subject to scrutiny before a Division Bench of the respective High Courts. The Tribunals will consequently also have the power to test the vires of subordinate legislations and rules. However, this power of the Tribunals will be subject to one important exception. The Tribunals shall not entertain any question regarding the vires of their parent statutes following the settled principle that a Tribunal which is a creature of an Act cannot declare that very Act to be unconstitutional. ...... We may add that the Tribunals will, however, continue to act as the only courts of first instance in respect of the areas of law for which they have been constituted. By this, we mean that it will not be open for litigants to directly approach the High Courts even in cases where they question the vires of statutory legislations (except, as mentioned, where the legislation which creates the particular Tribunal is challenged) by overlooking the jurisdiction of the concerned Tribunal. ........ 99. ............. While this jurisdiction cannot be ousted, other Courts and Tribunals may perform a supplemental role in discharging the powers conferred by Articles 226/227 and 32 of the C....