TaxTMI 
TaxTMI 
2025 (6) TMI 1264
X X X X Extracts X X X X
X X X X Extracts X X X X
....l service tax authorities and have obtained service tax registration certificate No. AAACS6994CST020. The appellants also avail CENVAT credit of central excise duty paid on inputs and capital goods as well as service tax paid on input services as per the provisions of CENVAT Credit Rules, 2004 (for short, referred to as 'CCR'). 2.2 During the course of audit conducted by the Department on the books of account maintained by the appellants, the Department had enquired about the appellant's availing of exemption benefit under Notification No.09/2009-ST dated 03.03.2009. On scrutiny of the documents and the books of accounts, the Department had interpreted that the appellants have not fulfilled certain requirements for availing the service tax exemption viz., conditions of the notification dated 03.03.2009, Special Economic Zone Rules, 2005 and the circulars issued thereon. Therefore, the department had initiated show cause notice proceedings for demand of non-payment of service tax by the appellants on various grounds, the details of which are summarized below : Period Notification No. reference Conditions/Requirement no fulfilled by the appellants as alleged by the depart....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ine Thousand Six Hundred and Forty One Only) on the notice under Section 78 of the Finance Act, 1994. In this regard, attention of the notice is invited to the relevant provisos to Section 78 of the Finance Act, 1994 as per which if the service tax determined under Section 73 (2) of the Finance Act, 1994 and the interest payable thereon under Section 75 of the Finance Act, 1994 is paid within thirty days from the date of communication of this order, the amount of penalty liable to be paid under Section 78 shall be twenty-five per cent of the service tax determined, provided this reduced penalty is also paid within the said period of thirty days." Feeling aggrieved with the impugned Order dated 22.03.2016 the appellants have filed this appeal before the Tribunal. 3.1 Learned Counsel for the appellants submitted that the appellants have availed exemption from payment of service tax in respect of output services provided to SEZ in terms of Section 26 of the SEZ Act, 2005. The said legal provision giving exemption of service tax read with Section 51 ibid provide overriding effect to any other law, which if it contradicts or inconsistent to the extent it is provided in the SEZ Act....
X X X X Extracts X X X X
X X X X Extracts X X X X
....preferred by the appellants is liable to be set aside. 5. Heard both sides and perused the records of the case. We have also perused the additional written submissions presented in the form of paper books for this case. 6.1 The issue involved in this appeal is to determine whether the appellants are eligible to the exemption from payment of service tax in respect of Construction Service other than residential complex, including commercial / industrial buildings or civil Structures, provided to developers / units of Special Economic Zones (SEZ), under the provisions of Special Economic Zones (SEZ) Act, 2005 and the rules made thereunder read with exemption notifications, along with various conditions laid down in respective notifications, issued in this regard, or the appellants are liable to pay service tax on said services provided to developer or units or SEZ. 6.2 In adjudication of the SCN dated 07.04.2014, the learned Principal Commissioner for confirmation of the adjudged demands and for coming to the conclusion that the service tax is liable to be paid by the appellants and the exemption for supply of taxable services to SEZ under notification No. 04/2004-S.T. dated ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f services of Commercial or Industrial Construction Services (CICS) provided to M/s Maharashtra Airport Development Co. Ltd. 6.5.1......Notification No.17/2011-ST dated 01.03.2011 ..... exempts taxable services..... subject to the following conditons, namely:- (a) the exemption shall be provided by way of refund of service tax paid on the specified services received for the authorised operations in a SEZ: Provided that where the specified services received and used for authorised operations are wholly consumed within the SEZ, the provider of such services or the receiver of such services on reverse charge basis, as the case may be, has the option not to pay the service tax ab initio instead of the Unit or Developer claiming exemption by way of refund in terms of this notification..... xxx xxx xxx xxx 6.5.3 Further, the notice has not produced any declaration in Form A-1 duly verified by the Specified Officer. Therefore, I find that the noticee is not eligible to claim exemption under Notification No. 17/2011-ST dated 01.03.2011, in respect of services of CICS, provided either to M/s Tata consultancy Services Ltd. or any other unit of SEZ...... ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not eligible to claim ab initio exemption under Notification No.12/2013-ST dated 01.07.2013, in respect of services of CICS provided either to M/s Tata Consultancy Services Ltd. or any other unit of SEZ. From the above it transpires that the learned Principal Commissioner had concluded that the appellants are liable to pay service tax demanded in the SCN and are not eligible for exemption as they had not fulfilled the conditions of the notification, obtained necessary approval lists from concerned authorities etc. 7. In order to appreciate the above issue under dispute, the relevant legal provisions of the SEZ Act, 2005 and SEZ Rules, 2006, Notification No. 04/2004-S.T. dated 31.03.2004 and subsequent amendments to such notification, which is relevant to the dispute, are extracted and herein given below for ease of reference: "Special Economic Zones Act, 2005 [28 of 2005] An Act to provide for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto. Be it enacted by Parliament in the Fifty-sixth Year of the Republic of India as follows :- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....awback or such other benefits as may be admissible from time to time on goods brought or services provided from the Domestic Tariff Area into a Special Economic Zone or Unit or services provided in a Special Economic Zone or Unit by the service providers located outside India to carry on the authorised operations by the Developer or entrepreneur; (e) exemption from service tax under Chapter V of the Finance Act, 1994 (32 of 1994) on taxable services provided to a Developer or Unit to carry on the authorised operations in a Special Economic Zone; (f) exemption from the securities transaction tax leviable under section 98 of 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 exempt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sions of this Chapter and other Chapters shall apply to goods admitted to a special economic zone, but in the event of conflict between the provisions of this Chapter and other Chapters, the provisions of this Chapter shall prevail.76-C. Establishment and control.- (1) The Central Government may make rules specifying the requirements relating to goods or class of goods admissible to a special economic zone, the nature of operations to which such goods or class of goods may be subjected to, the conditions to be fulfilled and the procedures to be followed in this regard. (2) The Board may specify, in the regulations made in this behalf, arrangements for customs control in a special economic zone. (3) The proper officer shall have the right to carry out checks, at any time, on the goods kept or stored in a special economic zone.76-D. Admission of goods.-Subject to such conditions as may be specified in the rules made in this behalf, any goods imported directly from outside India or procured from within India shall be authorised for admission to a special economic zone.76-E. Exemption from duties of customs.-Without prejudice to the provisions of sections76-F....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of duty shall be subject to execution of such bond and such surety or security as may be specified in the rules made in this behalf. 76-L. Transfer of ownership.-Any goods admitted to, or produced or manufactured in, a special economic zone shall be allowed for transfer of ownership subject to such conditions as may be specified in the rules made in this behalf. 76-M. Removal of goods.-Any goods admitted to, or produced or manufactured in, a special economic zone may be removed in accordance with such procedure as may be specified in the rules made in this behalf. 76-N. Closure of a special economic zone.-In the event of closure of a special economic zone by the Central Government, by notification in the Official Gazette, the goods admitted to, or produced or manufactured in, such zone shall be removed within such time and in such manner as may be specified in the rules made in this behalf." . 8.2 On plain reading of the above said legal provisions of the SEZ Act, 2005 and the Customs Act, 1962, it transpires that the Chapter X-A providing for special provisions relating to SEZ were omitted or removed from the Customs Act, 1962 consequent to the Parli....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Mr. S. Niranjan Reddy, Learned Senior Counsel appearing for the petitioners, is that there is no scope for restricting Section 26, especially when the SEZ Act, 2005 which is also a parliamentary enactment of a later date, is given an overriding effect under Section 51 of the Act. 20. In order to find an answer to this question, one must understand in conceptual terms, what a Special Economic Zone is. As pointed out by the Madras High Court in Nokia India Sales, a SEZ (1) is a territory outside the Customs Territory of India for the purpose of undertaking authorized operations and (2) is deemed to be a port, in land container depot, land stations and land customs station under Section 7 of the Customs Act, 1962. This is by virtue of Section 53 of SEZ Act, 2005. Keeping this core concept in mind, let us now go to the provisions of the Act. Section 7 of the Act exempts from payment of taxes, duties or cess, under all enactments specified in the First Schedule, any goods or services exported out of or imported into or procured from Domestic Tariff Area, by a unit in a SEZ or a developer. But Finance Act, 1994 is not one of the enactments specified in the First Schedule. There....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncial 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)." 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 sub-section (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 "prescribed" appearing in Section 2(w) of the SEZ Act, 2005. Section 2(w) of the Act read....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Finance (No. 2) Act, 1998 with effect from 16-10-1998. The notifications issued under Section 93 may cover taxable services of any description. Even the units located outside a SEZ are entitled to the benefit of the notifications issued under Section 93 of the Finance Act, 1994, if the conditions stipulated in those notifications are fulfilled. 28. The SEZ Act, 2005 is also a parliamentary enactment issued later in point of time to the Finance Act, 1994 and Section 51 of the Act declares that the provisions of the SEZ Act, 2005 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. Section 51 reads as follows : "51. Act to have overriding effect. - 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." 29. The contention of Smt. Sundari R. Pisupati, Learned Senior Standing Counsel is that there is no inconsistency between (i) the terms and condit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....7, 26 and 50 of the SEZ Act, 2005, would show that SEZ Act, 2005 speaks of three different types of exemptions. They are, - (1) exemption from payment of taxes under the enactments specified in the First Schedule, in respect of goods and services exported out of, or imported into or procured from a DTA by a unit in a Special Economic Zone or a Developer under Section 7, (2) exemption from payment of duties under the Customs Act, 1962, Customs Tariff Act, 1975, Central Excise Act, 1994, Central Excise Tariff Act, 1985, Finance Act, 1994, Finance (No. 2) Act, 2004 and Central Sales Tax Act, 1956, covered by Section 26 (1); and (3) exemption from payment of state taxes, levies and duties covered by Section 50, provided there is a state enactment to the said effect. 33. The word "prescribe" is used in the present tense in Section 26(2) and in the past tense in Section 7. Both will have the same meaning as assigned to the word under Section 2(w). The moment a set of rules is issued either in respect of matters covered by Section 7 or in respect of matters covered by Section 26(1), there is no scope for invoking any other law for imposing any other con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her an Act is a self-contained code or not. In paragraph 35 of the report in Girnar Traders, the Supreme Court held that where a law contains a compilation of provisions, which would comprehensively deal with various aspects of the purpose sought to be achieved by that law and its dependence on other legislations is either absent or minimal, the same can be said to be a complete code. 37. Even if apply the parameters indicated in Girnar Traders, the case on hand would pass the test. Section 26(1) of the SEZ Act indicates (1) persons who are entitled to exemptions; (2) the duties in respect which exemption is available; (3) the circumstances under which exemption is available and (4) the provisions of law subject to which the exemptions are available. To put it in simple terms, Section 26(1) identifying the persons, who are eligible for exemption. They are the Developer and entrepreneur. Section 26(1) identifies the duties from which exemption is available. They are the duties under the Customs Act, Customs Tariff Act etc. Section 26(1) also indicates the circumstances under which the exemptions are available. These circumstances vary from clause to clause under Section 26(....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the amendment introduced to the SEZ Rules by way of notification in GSR 772(E), dated 5-8-2016. Under this notification, sub-rule (5) was inserted under Rule 47 of the SEZ Rules, 2006. This sub-rule (5) inserted in Rule 47 of the SEZ Rules, 2006 reads as follows : "(5) Refund, Demand, Adjudication, Review and Appeal with regard to matters relating to unauthorized operations under Special Economic Zones Act, 2005, transactions, and goods and services related thereto, shall be made by the Jurisdictional Customs and Central Excise Authorities in accordance with the relevant provisions contained in the Customs Act, 1962, the Central Excise Act, 1944, and the Finance Act, 1994 and the rules made thereunder or the notifications issued thereunder". 41. On the strength of the aforesaid circular and the amendment to the Rules, it was contended by the Learned Senior Standing Counsel that the machinery provisions for working out refund, drawback etc., are not available either in SEZ Act or the Rules framed thereunder and that therefore, the operation of the Act is subject to the provisions of the other enactments. 42. But, we do not agree. Though the "section ti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....UPREME COURT OF INDIA RECORD OF PROCEEDINGS SPECIAL LEAVE PETITION (CIVIL) Diary No(s).22140/2019 (Arising out of impugned final judgment and order dated 27-12-2018in WP No. 13546/2018 passed by the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh) UNION OF INDIA & ANR. Petitioner(s) VERSUS M/S GMR AEROSPACE ENGINEERING LIMITED & ORS. Respondent(s) (WITH I.R. and IA No.105573/2019-CONDONATION OF DELAY IN FILING and IA No.105575/2019-EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT) Date : 26-07-2019 This petition was called on for hearing today. CORAM : HON'BLE DR. JUSTICE D.Y. CHANDRACHUD HON'BLE MR. JUSTICE ANIRUDDHA BOSE For Petitioner(s) Ms. Pinky Anand, ASG Mr. Arijit Prasad, Sr. Adv. Mr. Vikrant Yadav, Adv. Mr. Abhishek Kumar, Adv. Ms. Tanisha Samanta, Adv. Mr. B. Krishna Prasad, AOR For Respondent(s) UPON hearing the counsel the Court made the following ORDER Delay condoned. In the facts and circumstances of the present case,we see no reason to interfere with the impugned judg....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... service tax by the SEZ Act itself (subject to the manner which may be prescribed) and there are also exemption notifications under the respective tax laws which are also subject to some conditions. The exemption notification in dispute in this case is service tax exemption notification ST- 40/2012 dated 20-6-2013. 24. This contradiction and duplication of exemption under the two provisions viz. SEZ Act and Rules and the exemption notifications under the Finance Act, 1994 were discussed at length by this bench in case of DLF Assets 2021 (45) G.S.T.L. 176 (Tribunal), the relevant extract of which is reproduced below : "10. According to the appellant, as the aforesaid services were utilized for authorized operations by the recipient SEZ units, there was no necessity to pay any service tax. The Department, however, alleged that though the exemption provided under the SEZ Act is contained in the Notification dated March 3, 2009, but the appellant did not follow the conditions prescribed therein and, therefore, was liable to pay service tax on renting of immovable property services to SEZ units. The Department also alleged that since the appellant had classified signag....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... exemption on services rendered to SEZ units was available only by way of refund and thus the appellant was not eligible for ab-initio exemption, which was introduced subsequently by amendment of Notification dated March 3, 2009 by Notification No. 15/2009-ST w.e.f. May 20, 2009. It would, therefore, be necessary to reproduce the aforesaid two Notifications. The relevant portion of the Notification dated March 3, 2009 is reproduced below: Notification No. 09/2009-Service Tax : Dated March 3, 2009 G.S.R. 146 (E) - In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), and in supersession of the Notification of the Government of India, Ministry of Finance (Department of Revenue), No. 4/2004-Service Tax, dated the 31st March, 2004, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) dated the 31st March, 2004, vide, G.S.R.248(E), dated the 31st March, 2004, except as respects things done or omitted to be done before such supersession, the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services specified in cla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he sub-section (2), every Developer shall be entitled to exemptions and the exemption at (e) exempts every Developer from service tax under Chapter-V of the Finance Act on taxable services provided to a Developer or unit to carry on the authorized operations in a SEZ. Section 51 of the SEZ Act provides for an overriding effect to the provisions of the SEZ Act. The provisions of section 26 read with rule 31 of the SEZ Rules thus, have overriding effect over anything inconsistent contained in any other law for the time being in force, which would include the Finance Act. It needs to be noted that the Notification dated March 3, 2009 has been issued in exercise of the powers conferred by section 93 of the Finance Act. Thus, when the services rendered by the appellant are fully exempted from service tax in terms of the provisions of the SEZ Act, the condition of exemption by way of refund imposed under the Notification issued under the Finance Act would be inconsistent with the provisions of the SEZ Act. It also needs to be noted that the SEZ Act was enacted in 2005, much after the enactment of the Finance Act in 1994. 19. This issue was examined by the Telangana and Andhra Pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s issued under section 93 of the Finance Act, 1994, and (ii) the terms and conditions prescribed in rules 22 and 31 of the SEZ Rules, 2006, and that therefore, section 51 of the SEZ Act, 2005 cannot be pressed into service. But this contention is unacceptable. 30. This is for the reason that section 26(1) of the SEZ Act made the entitlement to certain exemptions subject to provisions of sub-section (2) of section 26. Section 26(1) did not make the entitlement of a developer to certain exemptions, subject to the provisions of something else other than the provisions of sub-section (2). Therefore, the firth respondent cannot read section 26(1) to mean that the exemptions listed therein are (1) subject to the provisions of sub-section (2) of section 26, and (2) also subject to the terms and conditions prescribed in the Customs Act, 1962, the Customs Tariff Act, 1975, the Central Excise Act, 1944, the Central Tariff Act, 1985 and the Finance Act, 1994. This is especially so, since the authority of the Central Government to prescribe the terms and conditions subject to which exemptions may be granted under section 26(1), flows only out of sub-section (2) of section 26. The word....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat part of the tax law have been overridden by the SEZ Act. To answer this question, we proceed to examine the requirement under the Constitution of India to levy taxes and the relevant legal provisions of the Central Excise Act and Customs Act and Chapter V of the Finance Act, 1994 under which Service Tax is levied. 26. Taxes can be levied only as per article 265 of the Constitution of India which reads as follows : 265. Taxes not to be imposed save by authority of law.-No tax shall be levied or collected except by authority of law. 27. This authority of law to levy and collect taxes is in the form of charging sections of the Acts- such as section 3 of the Central Excise Act, 1944, section 12 of the Customs Act, 1962 and sections 66, 66A and section 66B of Chapter V of the Finance Act, 1994 (for collection of Service Tax). While section 66 provides for levy of service tax on forward charge basis by the service provider, section 66A provides for charge of service on reverse charge basis by the service recipient in case of certain services. Section 66B provides for levy of service tax on all services other than those in the negative list after 2012. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pers and units are concerned, section 26 of the SEZ Act overrides the charging sections in all the three Acts. 31. The charging sections, having been overridden by the SEZ Act, no legal authority to levy and collect central excise duty, customs duty or service tax for goods or services supplied for authorised operations of SEZ developers and units covered by section 26 remains. Without such a legal authority, no tax or duty can be either levied or collected in view of article 265 of the Constitution of India. 32. Therefore, there is no need for any exemption notifications under any of these three Acts, nor is it necessary to fulfil any of the conditions laid down in the exemption notifications, if any, issued for the purpose. Thus, the charge of excise duty under section 3 of the Central Excise Act, the charge of customs duty under section 12 of the Customs Act and the charge of service tax under sections 66, 66A and 66B of the Finance Act, 1994 will not apply to goods and services supplied to developers and units for authorized operations in the SEZ areas by virtue of the overriding provisions of the SEZ Act. Any exemption notifications and conditions therein are....
X X X X Extracts X X X X
X X X X Extracts X X X X
....are disposed of. 34. In view of the aforesaid legal position, the exemption notifications issued under the Finance Act, 1994 are redundant because service tax was already exempted by the Parliament by section 26 of the SEZ Act. Any conditions in such notifications are also, therefore, irrelevant and need not be fulfilled....." 11.1 We also find that the Tribunal in the case of Eclerx Services Ltd. (supra) have held that SEZ unit was eligible for exemption from service tax on services received by it and in view of the overriding effect of SEZ law, denial of exemption on the grounds of procedural infirmities is not sustainable. The relevant paragraph of the said order is extracted and given below: "6. The issue to be decided on this appeal is plain and simple enough: whether the notifications relied upon by the adjudicating authority can invalidate exemption accorded under '26. (1) Subject to the provisions of sub-section (2), every Developer and the entrepreneur shall be entitled to the following exemptions, drawbacks and concessions, namely: - (a) exemption from any duty of customs, under the Customs Act, 1962 or the Custom Tariff Act, 197....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther than this Act.' of Special Economic Zones Act, 2005 that no other law can prevail over it. 7. It is on record that the required documentation was not available for the entire period of the dispute but, at the same time, it cannot be denied that at some point, the eligibility did exist. The procedural infirmities, for a shorter or longer time, does not in any way supplant the exemption accorded to the impugned supply of services. Furthermore, the findings of the adjudicating authority do not arrive at a conclusion that, but for the said procedural infirmities, the eligibility of the appellant to render such services without payment of tax was in question. In the light of decision cited supra, the overriding nature of the exemption afforded by section 26 of Special Economic Zones Act, 2005 and the breach of conditions being procedural, we have no hesitation in setting aside the demand pertaining to the rendering of services to M/s Credit Suisse Service (India) Pvt. Ltd. 8. The next issue concerns the finding that the services had been rendered in India and consumed in India. The definition of '(m) "export" means - (i) taking g....