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2018 (7) TMI 174 - AT - Service TaxServices provided to a SEZ unit for services consumed within SEZ unit - interpretation of statute - services as cab Operator to IT/ITES SEZ companies by way of picking and dropping the employees - benefit of N/N. 4/2004 cit. 31.03.2004 - SCN alleges that the services have not been consumed within the SEZ unit. Held that - The words in a SEZ used in the said Rule has led to doubts as to whether services which are partly availed outside the SEZ like that of tour operator service/ Rent -a-cab service used for picking up and dropping employees are eligible for exemption from service tax - When the service is ultimately consumed within the SEZ unit, whether services commenced outside the unit /or ended outside unit is of no consequence. When in effect the services are consumed within SEZ, the benefit of notification cannot be denied. Further by virtue of Section 51 of the SEZ Act, the provisions of the SEZ Act, has overriding effect over the provisions contained in any other law - also, Rule 31 cannot restrict the benefit of exemption extended under the Act. Appeal dismissed - decided against Revenue.
Issues:
1. Eligibility for exemption under notification 4/2004 for services provided to SEZ units. 2. Interpretation of the SEZ Act and its overriding effect on other laws. 3. Application of Rule 31 of SEZ Rules, 2006 in relation to service tax exemption. 4. Consideration of services consumed within SEZ for exemption eligibility. Eligibility for Exemption under Notification 4/2004: The case involved a dispute regarding the eligibility of a service provider for exemption under notification 4/2004 for services provided to SEZ units. The Department alleged that the services were not consumed within the SEZ unit, leading to a Show Cause Notice for service tax, interest, and penalties. The Commissioner (Appeals) set aside the demand, interest, and penalties, emphasizing the intent of the notification and the SEZ Act. The Tribunal upheld the Commissioner's decision, highlighting that the services, although commencing outside the SEZ premises, were ultimately consumed within the SEZ unit. This consumption within the SEZ was deemed crucial for exemption eligibility, aligning with the purpose of making SEZ a duty-free zone under the SEZ Act. Interpretation of the SEZ Act and Its Overriding Effect: The Tribunal considered the SEZ Act's overriding effect on other laws, particularly in the context of service tax exemption. Section 51 of the SEZ Act stipulates that the Act prevails over any inconsistent provisions in other laws. Given that the SEZ Act aimed to promote exports and economic development, services consumed within the SEZ unit were deemed eligible for exemption under notification 4/2004. The Tribunal emphasized that the SEZ Act's provisions, having come into force before the period in question, held precedence over any conflicting rules or notifications, thereby supporting the decision to grant exemption based on the Act's intent. Application of Rule 31 of SEZ Rules, 2006: The Tribunal addressed the application of Rule 31 of SEZ Rules, 2006, which provided for exemption from service tax for authorized operations within a SEZ. The rule's wording, specifically "in a SEZ," raised doubts regarding services partially availed outside the SEZ, such as tour operator services for employee transportation. The Tribunal clarified that when services were ultimately consumed within the SEZ unit, the location of service commencement or conclusion outside the unit was immaterial. The benefit of exemption could not be denied based on technicalities, as long as the services were consumed within the SEZ, aligning with the SEZ Act's intent of creating a duty-free zone. Consideration of Services Consumed within SEZ for Exemption Eligibility: The Tribunal emphasized that services consumed within the SEZ unit, even if partially availed outside the premises, were eligible for exemption from service tax. The Tribunal rejected the argument that services must be wholly or exclusively used within the SEZ for exemption, as it would contradict the broader definition of export under the SEZ Act. By considering the SEZ Act's overarching effect and the intent behind notification 4/2004, the Tribunal upheld the decision to dismiss the Revenue's appeal, affirming the eligibility of the service provider for exemption based on services consumed within the SEZ unit.
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