2012 (6) TMI 458 - AT - Service Tax

Notification No.4/2004-ST - alleged wrong availment of said Notification for the CHA services rendered outside the unit situated at Special Economic Zone, Chennai - demand together with interest and penalty u/s 76 & 78 imposed - Held that - Notification No.4/2004-ST being a conditional exemption notification issued u/s 93 of the Finance Act 1994, exempting taxable services provided to developer of a SEZ or a unit in the SEZ by any service provider for consumption of service within such SEZ, cannot be interpreted on the basis of the provisions of SEZ Act, 2005 or the Rules made thereunder and the conditions specified therein have to be fully satisfied for availing the benefit under the said notification. Further, the notification came into force much before the Special Economics Zone Act or the Rules made there under came into force. Therefore, exemption will not be available if the services are consumed elsewhere than in the SEZ. Accordingly, appellant directed to make a pre-deposit of Rs.1.00 Crore within a period of eight weeks and report compliance - Decided against assessee.

Summary

Issues:
- Applicability of service tax exemption under Notification No.4/2004-ST for services provided to a Special Economic Zone (SEZ).
- Interpretation of the exemption notification in relation to the SEZ Act, 2005 and SEZ Rules, 2006.
- Consideration of judgments in similar cases and their relevance to the present matter.
- Legal principles governing the interpretation of exemption notifications in taxation laws.
- Requirement of pre-deposit of dues adjudged and stay application.

Issue 1: Applicability of service tax exemption under Notification No.4/2004-ST for services provided to a Special Economic Zone (SEZ).

The appellant, engaged in various services, claimed exemption under Notification No.4/2004-ST for services provided to a unit in a Special Economic Zone (SEZ). The demand was raised by the Commissioner for service tax, interest, and penalties. The appellant argued that they were entitled to the exemption under the SEZ Act, 2005 and SEZ Rules, 2006, along with reliance on specific judgments to support their stance.

Issue 2: Interpretation of the exemption notification in relation to the SEZ Act, 2005 and SEZ Rules, 2006.

The Tribunal analyzed the legal provisions and held that the exemption notification must be strictly interpreted based on its language. The Tribunal referred to various judicial precedents emphasizing strict interpretation of exemption notifications in tax laws. It was concluded that the exemption is applicable only if services are consumed within the SEZ, and the notification cannot be read in conjunction with subsequent legislations like the SEZ Act, 2005 or SEZ Rules, 2006.

Issue 3: Consideration of judgments in similar cases and their relevance to the present matter.

The Tribunal discussed the judgments cited by both parties, highlighting that the principles of statutory interpretation laid down by the apex court are binding. The Tribunal differentiated the present case from the cited judgments, emphasizing that the benefit of exemption is contingent on services being consumed within the SEZ, as explicitly mentioned in the notification.

Issue 4: Legal principles governing the interpretation of exemption notifications in taxation laws.

The Tribunal extensively quoted various judicial decisions to establish the principles guiding the interpretation of exemption notifications. Emphasizing strict interpretation and the importance of clear language in exemptions, the Tribunal applied these principles to the present case to determine the eligibility for the claimed exemption under Notification No.4/2004-ST.

Issue 5: Requirement of pre-deposit of dues adjudged and stay application.

The Tribunal, after considering the arguments and legal precedents, ruled that the appellant failed to establish a case for a full waiver of the pre-deposit of dues adjudged. A pre-deposit of Rs.1.00 Crore was directed within a specified timeframe, with the balance of dues waived subject to compliance. The Tribunal highlighted the need to balance the interests of the appellant and the revenue authorities in granting a stay.

In conclusion, the Tribunal's judgment clarified the interpretation of the exemption notification, emphasizing the necessity of services being consumed within the SEZ for eligibility. The ruling also addressed the pre-deposit requirement and the considerations involved in granting a stay application.