2017 (9) TMI 783 - AT - Service Tax

Sub-contract - services utilized fully in SEZ - whether the appellant is entitled to exemption from Service tax in terms of N/N. 4/2004-ST read with N/N. 9/2009-ST as amended by N/N. 15/2009-ST which provided for exemption to the provider of service if such services are provided for utilization fully in the SEZ? - Held that - the approval should be either by the Deputy Commissioner and/or Board of approvals as the case case may be. Here, admittedly the work order has been issued by Deputy Commissioner, SEZ. Hence it amounts to providing and consuming service to SEZ and/or allotted through NBCC, as the operating agency to the appellant - Thus, there is ipso facto approval of the Deputy Commissioner of the SEZ. No further approval of the Approval Committee is required under the facts and circumstances. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Entitlement to exemption from Service tax under specific notifications for services provided in SEZ as a subcontractor.
2. Disallowance of exemption and imposition of Service tax, interest, and penalties.
3. Adjudication of Show Cause Notice and appeal process.

Analysis:
1. The primary issue in this case revolves around the appellant-assessee's entitlement to exemption from Service tax under Notification No. 4/2004-ST and subsequent amendments for services provided in the Noida-SEZ as a subcontractor in civil construction work. The appellant's contention was that the services provided were fully utilized in the SEZ, thus qualifying for the exemption. However, the Revenue argued that the requisite approvals were not obtained, leading to the demand for Service tax payment.

2. The Revenue, through a Show Cause Notice, alleged that the appellant failed to provide evidence of the necessary approvals for the construction work undertaken in the SEZ, resulting in the demand for Service tax payment along with interest and penalties. The Order-in-Original confirmed the demand, and subsequent appeals to the Commissioner (Appeals) were rejected, leading the appellant to approach the Tribunal challenging the decision.

3. During the proceedings, the appellant's counsel highlighted the contractual arrangements and the flow of work from the main contractor to the subcontractor, emphasizing that the ultimate service consumption was by the Deputy Commissioner of the SEZ. The Tribunal noted the absence of separate services and property transfers, affirming that the service was provided and consumed in the SEZ, thereby meeting the approval requirements. The Tribunal referenced relevant legal precedents to support its decision and concluded that no further approval from the Approval Committee was necessary, ultimately allowing the appeal and setting aside the demand for Service tax and associated penalties.

4. The Tribunal's decision was based on the finding that the services provided by the appellant were in compliance with the SEZ requirements, as evidenced by the work order issued by the Deputy Commissioner. The Tribunal also observed that there was no deliberate concealment of facts by the appellant, leading to the setting aside of penalties under Section 78 and Section 77 of the Finance Act, 1994. The appellant was granted consequential benefits in accordance with the law, concluding the matter in favor of the appellant.