2011 (3) TMI 639 - AT - Service Tax

Exemption - Notification No. 4/2004 -ST dated 31.3.04 - SEZ Units - This Rule states that exemption from service tax is available to services rendered to a unit in the SEZ for the authorised operations - There is no dispute that the containers provided to the units in the SEZ have been used by such units for the authorised operations, namely, for bringing inputs for manufacture and carrying the finished goods out of SEZ for export purposes - Therefore, the impugned services relating to supply of containers in the SEZ are exempt from payment of service tax - Decided in favour of assessee.

Summary

Issues:
Interpretation of Service Tax Notification No. 4/2004 - Exemption for services provided to units in Special Economic Zone (SEZ).
Applicability of SEZ Act and SEZ Rules on service tax exemption for services consumed within SEZ.

Analysis:
The judgment dealt with the interpretation of Service Tax Notification No. 4/2004 regarding the exemption for services provided to units in SEZ. The appellant provided containers to units in SEZ, and the service tax demand was made based on the containers being used partly inside and partly outside the SEZ. The appellant argued that under the SEZ Act and SEZ Rules, there is an exemption from service tax for services provided to a unit in the SEZ, regardless of whether the containers carried cargo out of the SEZ territory. The SEZ Act Section 26 provides exemptions, including service tax exemption for services to units for authorized operations in the SEZ. The Tribunal noted that the SEZ Act does not restrict the consumption of services and extends the exemption to services rendered to a unit in the SEZ for authorized operations.

The judgment also referred to Rule 31 of the SEZ Rules, 2006, which states that the exemption from service tax is available for services rendered to a unit in the SEZ for authorized operations. The containers provided to the units in the SEZ were used for bringing inputs for manufacture and carrying finished goods out of the SEZ for export purposes, which were considered authorized operations. Therefore, the Tribunal held that the services related to the supply of containers in the SEZ are exempt from the payment of service tax. Consequently, the impugned order was set aside, and the appeals were allowed, with the stay applications also being disposed of.