2023 (5) TMI 653

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....e facts above, it is clear that the provisions under the SEZ Act, 2005 provide ab initio exemption to service tax for services received by the units operating in SEZ. Further these provisions have an overriding effect over anything inconsistent therewith contained in any other law for the time being in force. As there is no dispute that services were actually provided by the noticee and consumed in the SEZ, substantial benefit cannot be denied. In light of the above findings, I hold that the Noticee is eligible to exemption of service tax for services provided to units located in SEZ and I drop the demand of Rs. 38,86,015/-. Since there is no demand, there is no question of interest under Section 75 or penal consequences under Section 76 or 78 of the Act ibid.2." (emphasis supplied) 4. It is this dropping of the demand that has led to the filing of this appeal by the department. 5. The applicability of the notifications issued under section 93(1) of the Finance Act, 1994 [The Finance Act], which exempt taxable services provided in relation to the authorized operations in SEZ, has been considered by the Tribunal in SRF Ltd. Vs. Commissioner of Customs, Central Excise & Service ....

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....er of GMR Hyderabad Aviation SEZ, entered into a sub-lease agreement with the first petitioner for rendering certain services. It, however, claimed examination on the ground that under section 26(1)(e) of the SEZ Act, every Developer was entitled to exemption from service tax under Chapter-V on the Finance Act on taxable services provided to a Developer or unit to carry on the authorized operations in a SEZ and the same was not dependent upon the conditions stipulated in the Notification issued under section 93 of the Finance Act. 20. It is in this context that the Andhra Pradesh High Court observed as follows: "22. It may be noted that sub-section (1) of section-26 begins with the words "subject to the provisions of sub-section (2)". Sub-section (2) authorizes the Central Government to prescribe the manner in which and the terms and conditions subject to which exemptions shall be granted to the developer or entrepreneur under subsection (1). 23. As rightly pointed out by Sri S. Niranjan Reddy, Learned Senior Counsel appearing for the petitioner, the word "prescribe" appearing in sub- section (2) of section 26 has to be understood with reference to the definition of the word ....

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....y the Central Government under the SEZ Act, 2005. The space is also not left unoccupied, as the Central Government has issued a set of rules known as "the Special Economic Zones Rules, 2006", wherein the Central Government has prescribed the terms and conditions for grant of exemptions under rule 22. Therefore, there is no question of comparing the terms and conditions prescribed in rule 22 with the terms and conditions prescribed in the Notifications issued under any one of the five enactments listed in section 26(1) to find out whether there was any inconsistency. 34. The benefit of exemptions granted under the Notifications issued under section 93 of the Finance Act, 1994, are available to any one and not necessarily confined to a unit in a special economic zone. Section 93 of the Finance Act, in that sense is a general power of exemption available in respect of all taxable services. But, section 26(1) is a special power of exemption under a special enactment dealing with a unit in a special economic zone. Therefore, the Notifications issued under section 93 of the Finance Act, 1994 cannot be pressed into service for finding out whether a unit in a SEZ qualifies for exemption ....

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....able services provided to a Developer or Unit to carry on the authorised operations in a Special Economic Zone; 37. Thus, Section 26(1) of the SEZ Act is inconsistent with the three charging sections viz., Section 3 of the Central Excise Act, 1944, Section 12 of the Customs Act, 1962 and Sections 66, 66A and 66B of Chapter V of the Finance Act, 1994. In addition to the general principle of a specific law (pertaining to SEZ) prevailing over the general law (levying customs, central excise or service tax) and the later enactment (such SEZ Act, 2005) prevailing over the earlier enactments (Central Excise Act, 1944, Customs Act, 1962 and Finance Act, 1994), in the SEZ Act, the Parliament has explicitly resolved this inconsistency between the laws. Section 51 of the SEZ Act states that the provisions of SEZ Act override any other provisions of other laws. It reads as follows: 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. 38. Thus, insofar as supplies for authorised operations of SEZ developers and....