TaxTMI 
TaxTMI 
2025 (6) TMI 1264
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....ervice 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 department Reasons for proposing confirmation of demand 1....
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....he 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. Further, he stated that Rule 10 of the SEZ Rules, 2005 for giving permission for procurement of items is not applicable to their case,....
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.... 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 31.03.2004 as amended notification No. 09/2009-S.T. dated 03.03.2009, Notification No.17/2011-S.T. dated 01.03.2011, is not appliable to them on the following findings record....
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....owing 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...... Provided that where the specified services received in SEZ and used for the authorised operations are wholly consumed within the SEZ, the person liable to pay service tax has the option not to pay the service tax ab initio instead of the SEZ unit or the developer c....
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....able 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 :- CHAPTER I PRELIMINARY Short title, extent and commencement. 1. (1) This Act may be called the Special Economic Zones Act, 2005. (2) It extends to the whole of India. (3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint, and different dates† may be appoint....
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....it 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 exemptions, concessions, drawback or other benefits shall be granted to the Developer or entrepreneur under sub-section (1). xxx xxx xxx xxx Act to have overriding effect. 51. 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." SEZ Rules, 2006 "10. Permission for procurement of items. - The Approval Committee may permit goods and ser....
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....pecify, 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, 76-G and 76-H, any goods admitted to a special economic zone shall be exempt from duties of customs. 76-F. Levy of duties of customs.-Subject to the conditions as may be specified in the rules made in this behalf,(a) any goods admitted to a special economic zone from the domestic tariff area shall be chargeable to export duties at such rates as are leviable on such goods when exported;(b) any goods removed from a special economic zone for home consumption shall be chargeable to duties of customs including anti-dumping, countervailing and safeguard duties under the Customs Tariff Act, 1975 (51 of 1975), where ....
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....mic 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 Parliament enacting a special legislation viz., SEZ Act, 2005. Moreover, in order to provide more clarity and purpose of such separate legislation for SEZ, a specific Section 51 of the said Act of 2005 has provided a non obstante clause stating that the provisions of SEZ Act, 2005 shall have the overriding effect, notwithstanding anything inconsistent therewith, if any, contained in any other law for the time being in force. Thus, if an exemption is provided under Section 26 of the SEZ Act, 2005, then the same cannot be taken away by prescribing certain conditions elsewhere in any other law or notification issued thereunder, which is contrary to the legal provisions made therein. ....
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....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. Therefore, Section 7 has no application to the case on hand. 21. However, Section 26(1) specifically allows exemptions, drawbacks and concessions to every developer and entrepreneur. These exemptions are confined to the enactments listed in clauses (a), (b), (c), (e), (f) and (g). Section 26 in its entirety reads as follows : "26. Exemptions, drawbacks and concessions to every Developer and entrepreneur. - (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 (52 of 1962) or the Customs Tariff Act, 1975 (51 of 1975....
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.... 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 reads as follows : "prescribed" means prescribed by rules made by the Central Government under this Act." 24. Therefore, the terms and conditions subject to which the exemptions are to be granted under sub-section (1) of Section 26 should be prescribed by the Rules made by the Central Government under the SEZ Act, 2005. Being conscious of this fact, the executive has incorporated Rule 22 in the SEZ Rules, 2006 issued in exercise of the power conferred by Section 55 of the SEZ Act. It is not necessary to extract Rule 22, since there is no dispute about the fact (1) that the petitioners have complied with the prescriptions contained in Rule 22 of the SEZ Rules, 2006 and (2) that Rule 22 of the SEZ Rules, 2006 does not stipulate the filing of forms A1 and A2 as prescribed in the three notifi....
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....thstanding 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 conditions prescribed in the notifications 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 5th 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, 1....
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.... 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 condition. 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 or not. 35. For driving home her contention that SEZ Act, 2005 and the rules framed thereunder do not constitute a complete Code in themselves, Smt. Sundari R. Pispuati, Learned Senior Standing Counsel relied upon two decisions of the Supreme Court and one decision of the Madras High Cou....
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....ch 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(1). This can be best understood by providing a tabulation as follows : Duty exempted Circumstances under which exempted (1) Duty under Customs Act, 1962 (1) on goods imported into or services provided in a special economic zone or a unit to carry on the authorised operations by the Developer or entrepreneur (2) Duty under the Customs Tariff Act, 1975 (2) All goods exported from or services provided from a SEZ or from a unit to any place outside India. (3) Duty of excise under the Central Excise Act, 1944 or Central Excise Tariff Act, 1985 (3) All goods brought from DTA to a SEZ or unit to carry on the authorised operations by the Developer or entrepreneur (4) Service tax (4) on taxable services provided to a developer or unit to carry on the authorised operations in a SEZ (5) Securities transaction tax leviable in Finance (No. 2) Act, 2004 (5) If the taxable securities transactions are entered into by a non-resident through th....
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.... 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 title" to Section 26 reads as "exemptions, drawbacks and concessions", clauses (a) to (g) except clause (d) speak only about exemptions. It is only clause (d) of sub- section (1) of Section 26, which speaks about drawbacks and such other benefits. In so far as exemption is concerned, sub-section (1) makes the entitlement of a Developer to exemption, subject only to the provisions of sub-section (2) of Section 26. Sub-section (2) of Section 26 empowers the Central Government to prescribe both the manner in which as well as the conditions subject to which exemptions may be granted. Therefore, the area relating to exemption is completely occupied by the rules. 43. It is only the issues relating to refund, demand, adjudication, review and appeal, which were left unoccupied by the SEZ Act and the Rules framed thereunder. Realising the vacuum in respect of these specific areas, sub-rule (5) was inserted under Rule 47. Sub-rule (5) of Rule 47 makes a reference to the provisions of the three enactments namely Custo....
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.... to interfere with the impugned judgment and order of the High Court. The Special Leave Petition is accordingly dismissed. Pending applications, if any, are disposed of. (SANJAY KUMAR-I) AR-CUM-PS (SAROJ KUMARI GAUR) COURT MASTER In view of the detailed analysis and categorical decision of the Hon'ble High Court of Andhra Pradesh which was upheld by the Hon'ble Supreme Court, the issues under dispute in the present case is no more open to debate, and a different view cannot be taken by this Tribunal. 9.3. We also note that the Hon'ble Supreme Court had dealt with the issue of "What is the interpretative rule to be applied while interpreting a tax exemption provision/notification when there is an ambiguity as to its applicability with reference to the entitlement of the assessee or the rate of tax to be applied?" in the case of Dilip Kumar and Company (supra). We find that in the present case, the question of ambiguity in interpretation are not the issue to be dealt, and therefore we do not find force in the argument of learned AR, that the same should apply to the present case. 10. We also find that the Co-ordinate Bench of the Tribunal in the case of Cummins Turbo ....
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....dvertisement, it was not entitled to claim exemption. 11. In order to appreciate the contentions advanced by learned Counsel for the appellant and the learned Authorized Representative of the Department, it will be appropriate to refer to the relevant provisions. Section 26 of the SEZ Act deals with exemptions, drawbacks and concessions to every Developer and entrepreneur. The relevant provisions are reproduced below: "26. Exemptions, drawbacks and concessions to every Developer and entrepreneur.- (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) to (d) ** (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 authorized operations in a Special Economic Zone (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)." 12. Section 51 of the SEZ Act further provides overriding ....
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....conomic Zone, and received by a developer or units of a Special Economic Zone, whether or not the said taxable services are provided inside the Special Economic Zone, from the whole of the service tax leviable thereon under section 66 of the said Finance Act: Provided that- (a) to (b) ** (c) the exemption claimed by the developer or units of Special Economic Zone shall be provided by way of refund of service tax paid on the specified services used in relation to the authorised operations in the Special Economic Zone; (d) to (g) ** 2. ** ** (emphasis supplied) 15. Proviso (c) to the aforesaid Notification dated March 3, 2009 was amended by Notification dated May 20, 2009. The amended proviso (c) is reproduced below: "(c) the exemption claimed by the developer or units of Special Economic Zone shall be provided by way of refund of service tax paid on the specified services used in relation to the authorised operations in the Special Economic Zone except for services consumed wholly within the Special Economic Zone;" 16. It would, therefore, be seen that prior to May 20, 2009 the exemption could be claimed by way of refund of service tax paid on the specified service....
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.... 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 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 th....
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....ccupied, 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 or not." ( emphasis supplied ) 21. Thus, what follows is that the Commission....
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.... and section 26 of the SEZ Act as per which they are exempted. Section 51 of the SEZ Act overrides the provisions of the other Acts and therefore, service tax is always exempted for the services provided to developers and units in SEZ regardless of any provisions of the Finance Act, 1994. Section 26 of the SEZ Act reads as follows: 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, 1975 or any other law for the time being in force, on goods imported into, or service provided in, a Special Economic Zone or a Unit, to carry on the authorised operations by the Developer or entrepreneur; (b) exemption from any duty of customs, under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any other law for the time being in force, on goods exported from, or services provided, from a Special Economic Zone or from a Unit, to any place outside India: (c) exemption from any duty of excise, under the Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 or an....
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....ief, was as follows. Service tax was levied under Chapter V of the Finance Act, 1994 under section 66 on taxable services. The list of taxable services was defined under section 65(105) and this list was expanded from time to time. If the taxable service was provided as a part of a works contract which involved both rendering the service and transfer or deemed transfer of goods, exemption notifications were issued by the Government towards abatement of the value of the goods used in the services. Later, on 1- 6-2007, works contract service, itself was introduced as a service. The question before the Supreme Court was whether works contract service could have been taxed under various other heads prior to this date. The Supreme Court held that there was no charge on works contract service prior to 1-6-2007 because works contracts services were a separate specie of contract known to commerce and there was no levy on such contracts prior to 1-6-2007. It was pleaded on behalf of the Revenue that abatements were given through various exemption notifications prior to 1-6-2007. The Supreme Court held as follows: 43. We need only state that in view of our finding that the said Finance Act....
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....m a Unit, to any place outside India; (c) exemption from any duty of excise, under the Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 or any other law for the time being in force, on goods brought from Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorised operations by the Developer or entrepreneur; (d) drawback 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 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 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 purc....
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....stic supply' in the scheme of service tax law and, in view of section 51 of Special Economic Zones Act, 2005, have to be read in the context of the exemption afforded by section 26 of Special Economic Zones Act, 2005 and not in terms of Finance Act, 1994. Consequently the prism through which the adjudicatory perception has been enunciated does not apply to the facts of the service rendered by the appellant. Accordingly, the demand for allegedly rendering of services within India does not sustain." 11.2 We further find that in the Civil Appeal filed by the department against the aforesaid order of the Tribunal holding that exemption provided under Section 26 of the SEZ Act, 2005 has over riding effect and that the breach of conditions is procedural, the Hon'ble Supreme Court had dismissed the appeal filed by the department, by upholding the order of the Tribunal. The copy of the said judgement of the Hon'ble Supreme Court is extracted and given below : IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 549 OF 2023 @ Dy. No. 42620 of 2022 THE COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX NAVI MUMBAI .....Appellant(s) Vs. ECLERX SERVICES L....