2023 (2) TMI 289 - AT - Service Tax

Demand of service tax for the service provided to SEZ for the service wholly consumed within their SEZ - Eligibility for exemption under notification no.9/2009-ST as amended by notification no.15/2009-ST dated 20.05.2009 - erection commissioning and installation service - notification no.4/2004-ST was superseded vide notification no.9/2009-ST dated 03.03.2009 whereby, the exemption was granted by way of refund after payment of service tax in relation to specified services - effect of such amendment, retrospective or prospective? - HELD THAT - The appellant have provided the services to SEZ during the period 03.03.2009 to 20.05.2009, during the said period the exemption to service provided to SEZ was available under notification no. 9/2009-ST which was by way of refund however, subsequently notification no.15/2009-ST dated 20.05.2009 was issued amending the notification no.9/2009-ST wherin, sub-para (c) of para 1 of the notification no.9/2009-ST was substituted. The amendment is explicitly by way of substitution of sub-para (c) in the notification no.9/2009-ST. It is settled law that if any amendment is brought whereby, the earlier terms of the notification is substituted then, such amendment shall be effective from retrospective effect i.e. from the date of original notification accordingly, for the services provided during the period 03.03.2009 to 20.05.2009 substituted sub-para (c) shall apply. As per the sub-para (c) of notification no. 15/2009-ST., if the service provided is for use in authorized operations in the SEZ shall be exempted without opting for the refund by the service provider subject to the condition the services are consumed wholly within the SEZ - In the present case, the service of erection, commissioning and installation is indeed used and wholly consumed in the SEZ therefore, the appellant is eligible for exemption under notification no.9/2009-ST as amended by notification no.15/2009-ST dated 20.05.2009. The demand of service tax in respect of services provided to authorized operation of SEZ is not sustainable accordingly, the impugned order is set aside - Appeal allowed.

Summary

Issues:
1. Interpretation of exemption notifications for services provided to SEZ.
2. Applicability of retrospective effect of notification amendments.
3. Impact of SEZ Act on taxation of services provided to SEZ.

Analysis:
1. The case involved the appellant providing various taxable services to clients, including those in SEZ, and availing exemptions under specific notifications. The dispute arose when the revenue demanded service tax for services provided to SEZ, leading to penalties and interest. The appellant contended that the services were wholly consumed within SEZ, making them eligible for exemption under relevant notifications.

2. The appellant argued that subsequent amendments to exemption notifications, particularly notification no.15/2009-ST, provided retrospective effect, exempting services consumed wholly within SEZ. Citing relevant circulars and judgments like SRF LIMITED, COGNIZANT TECHNOLOGY SOLUTIONS INDIA PVT. LTD., and others, the appellant emphasized the applicability of exemptions and the retrospective nature of the amendments.

3. The Deputy Commissioner for the revenue reiterated the findings of the impugned order. However, the Tribunal analyzed the amendments in detail, highlighting the substitution of sub-paragraphs and the conditions for exemption under notification no.15/2009-ST. The Tribunal concluded that the services provided by the appellant, being wholly consumed within SEZ, were eligible for exemption under the relevant notifications.

4. Additionally, the Tribunal considered the provisions of the SEZ Act, which stipulate that supplies to SEZ are not chargeable to duty or service tax. Referring to the judgment in RELIANCE JAMNAGAR INFRASTRUCTURE LIMITED, the Tribunal emphasized that services consumed within SEZ are not taxable, further supporting the appellant's claim for exemption.

5. Ultimately, the Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant. The judgment emphasized that the demand for service tax on services provided to authorized operations of SEZ was not sustainable, leading to the allowance of the appeal and the rejection of the service tax demand.

This detailed analysis showcases the legal interpretation of exemption notifications, the retrospective effect of amendments, and the impact of the SEZ Act on the taxation of services provided to SEZ, as discussed and decided by the Appellate Tribunal CESTAT AHMEDABAD in the cited judgment.