TaxTMI 
TaxTMI 
2025 (3) TMI 1505
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....siness of providing taxable services under the Finance Act, 1994. For this purpose, the appellants have registered themselves with the jurisdictional service tax authorities and have obtained centralized service tax registration certificate No. AAACS6994CST020 for the category of services viz. Business Auxiliary Services, Management Consultancy Service & Business Support Service and is also providing software related and business process outsourcing services from their Special Economic Zone (SEZ) units which are engaged in IT/ITES services, situated at various places across the country viz., Bangalore, Chennai, Gurgaon, Hyderabad, Navi Mumbai, Noida, Kolkata and Pune. The appellants, in the process of providing the said output services in the SEZ, received specified input services on payment of service tax for the authorized operations in the SEZ as approved by the Development Commissioner for IT/ITES and used them in authorised operation inside the SEZ by taking CENVAT Credit of input services as per the provisions of CENVAT Credit Rules, 2004 (for short, referred to as 'CCR'). 2.2 The appellants had filed seven refund claims before the jurisdictional Service Tax authorities in....
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....ng refunded. 21,05,543/- Input services are not approved by the approval committee of SEZ When the receipt of services within the SEZ is not dispute, this technical requirement can be overcome as the purpose of exemption is fulfilled. 16,73,641/- Services not actually performed in SEZ under Rule 4 of POPS In terms of para (2) of Notification No.40/2012 it is clear that services wholly consumed within SEZ in respect of services specified under Rule 4 or Rule 5 of POPS Rules, the assessee has the option to claim up-from exemption nor refund of service tax paid. 3.2 Learned Advocate for the appellants also submitted that the appellants have preferred various refund claims on the basis of the government's decision to exempt services which are used for authorised operation in SEZ and on which service tax is payable, by way of refund of service tax paid on the specified services by SEZ unit or Developer. Accordingly, they filed refund of service tax paid on the input services used for SEZ purpose. He further stated that legal provision for exemption from payment of service tax in respect of output services provided to SEZ in terms of Section 26 of the SEZ Act, 2005. ....
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....tion must be strictly complied with. In the absence of approval letter given by the SEZ authorities failing to mention the name of the appellants, such omission cannot be considered as substantial compliance for availing the service tax exemption. Therefore, he prayed that the appeal 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 disputed services, provided to developers / units of Special Economic Zones (SEZ), under the provisions of Finance Act, 1994; 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 seven refund claims periodically filed by the appellants as tabulated in paragraph 2....
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....ims filed by them for the period upto Dec.2011 have been allowed in respect of the service tax paid under section 66A. They also placed reliance in the case of BNP Paribas India in WP No. 9857 of 2012, Birla Corpn. Ltd etc. 19.... The AA also observed that the appellant has claimed refund of service tax paid under Section 66A on the import of services which are not inputs services as defined under Rule 2(l) of CCR and/or those are not actually used for the authorised operation in the SEZ and have also not provided any evidence to show that those were actually used for the authorised operation in SEZ.... Thus, placing reliance on the judgements of the Supreme Court, the AA has correctly based his decision of rejection of the claims as laid down in the Notifn. Accordingly, I uphold the rejection of the refund of the service tax of Rs.4,29,80,419/- 20. In view of the foregoing, the impugned orders are upheld and the seven impugned appeals filed by the appellant are rejected." From the above it transpires that the learned Commissioner (Appeals) had concluded that the appellants are not eligible for refund of service tax as they had not fulfilled the conditions of t....
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....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; (b) exemption from any duty of customs, under the Customs Act, 1962 (52 of 1962) or the Customs Tariff Act, 1975 (51 of 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 (1 of 1944) or the Central Excise Tariff Act, 1985 (5 of 1986) 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 ....
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....onomic Zones (SEZ) was initially provided under the Customs Act, 1962 vide Chapter XA under Sections 76A to 76N ibid, which was omitted with effect from 11.05.2007 under Section 90 of the Finance Act, 2007 (Act 22 of 2007), upon bringing a separate legislation governing the SEZs i.e., SEZ Act, 2005. 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 ....
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....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. 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 fr....
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....ns 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 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 ....
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....her 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 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....
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....y 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 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 f....
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....lable; (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(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 ....
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....t, 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 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 ....
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....bsp; 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 judgment and order of the High Court. The Special Leave Petition is accordingly dismissed. Pending applications, if any, are disposed of. (SANJAY KUMAR-I) &n....
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....ts covered by Section 26 of the SEZ Act, 2005. Without such legal authority, no tax or duty can be either levied or collected in view of Article 265 of Constitution of India, 1950. Therefore, the Tribunal have held that there is no need for exemption notifications under Central Excise Act, 1944, Customs Act, 1962 and Finance Act, 1994, nor is it necessary to fulfil of conditions under exemption notifications, if any, issued. The relevant paragraph of the said order is extracted and given below: "23. While the SEZ Act itself provided for exemption from service tax (as well as Central Excise duty and Customs duty), exemption notifications were also issued by the Government under the respective laws. These exemption notifications were also issued with some conditions. Thus, there is duplication inasmuch as the goods and services provided to authorised operations of developers and units in the SEZs are exempted from Customs duty, Central Excise duty and the 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 notificatio....
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....ll 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." 13. Section 55 of the SEZ Act gives power to the Central Government to make rules for carrying out the provisions of the Act. In exercise of the aforesaid powers, the Central Government made "The Special Economic Zones Rules, 200612 ". Rule 31 deals with the exemption from payment of service tax and is reproduced below: "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." 14. The impugned order has confirmed the demand of service tax on the ground that for the period from March 3, 2009 upto May 19, 2009, 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, 2....
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.... operations in the SEZ. However, proviso (c) was amended by Notification dated May 20, 2009. The amended proviso (c) stipulates that the exemption claimed by the developer or units of SEZ shall be provided by way of refund of service tax paid on the specified services, except for services consumed wholly within the SEZ. 17. The Notification dated March 3, 2009 has been issued in exercise of the powers conferred by section 93 (1) of the Finance Act. It is for this reason that it has been contended by learned Counsel for the appellant that the said Notification dated March 3, 2009 would not have any relevance to the case of the appellant when it sought exemption from payment of service tax under the provisions of section 26(1)(e) of the SEZ Act read with rule 31 of the SEZ Rules. 18. The contention advanced by the learned Counsel for the appellant has force. As noticed above, section 26(1) of the SEZ Act provides that subject to the provisions of the 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 t....
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....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 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 Notifications issued under section 93 of the Finance Act, 1994. 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 pr....
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....supplied) 21. Thus, what follows is that the Commissioner was not justified in examining whether the conditions set out in the Notification dated March 3, 2009 were satisfied or not for grant of any exemption from service tax. Section 26(2) of the SEZ Act does provide that the Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions shall be granted to the Developer under subsection (1) but what is important to notice, and as was also observed by the Andhra Pradesh High Court, the word "prescribe" would mean "prescribed by rules made by the Central Government under the SEZ Act," in view of the definition of "prescribed" under section 2(w) of the SEZ Act. The Notification dated March 3, 2009, which has been issued under section 93 of the Finance Act, therefore, has no application." 25. Thus, the legal position is that SEZ Act overrides any other law because of section 51 of the SEZ Act. The question is what 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 ....
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.... 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; ... (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; 29. 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. 30. Thus, insofar as supplies for authorised operations of SEZ developers 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 c....
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....h 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 lays down no charge or machinery to levy and assess service tax on indivisible composite works contracts, such argument must fail. This is also for the simple reason that there is no subterfuge in entering into composite works contracts containing elements both of transfer of property in goods as well as labour and services. 44. We have been informed by counsel for the revenue that several exemption notifications have been granted qua service tax "levied" by the 1994 Finance Act. We may only state that whichever judgments which are in appeal before us and have referred to and dealt with such notifications will have to be disregarded. Since the levy itself of service tax has been found to be non-existent, no question of any exemption would arise. With these observations, these appeals 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 o....
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....able 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 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). of Special Economic Zones Act, 2005. It is unquestionably clear from the '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.' 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 disput....