2023 (10) TMI 664 - AT - Service Tax

Interpretation of statute - incorrect interpretation of section 26(2) and section 58 of Special Economic Zones Act, 2005 - error apparent from the face of record or not - Recovery of Service tax alongwith penalty - Non-consideration by the Tribunal of section 26(2) and section 58 of Special Economic Zones Act, 2005 - HELD THAT - The exemption from service tax is, unlike goods, not related to place where the service is physically rendered but to the extent of deployment in pursuit of carrying out authorized operations and, that too, in accordance with the Special Economic Zones Rules, 2006. Authorized operations is defined in section 2(c) of Special Economic Zones Act, 2005 and any demand made under section 73 of Finance Act, 1994 without ascertainment of usage for authorized operations , thus defined, lacks authority of law. It has never been the case of Revenue that such exercise had been carried out by the adjudicating authority and found wanting. It is, thus, all too clear that the present application has been made without comprehending of the scope of section 26(2) of Special Economic Zones Act, 2005. There can be no claim that Finance Act, 1994 relates to Special Economic Zone in any manner as there is no reference therein to such expression and a notification, under section 93 of Finance Act, 1994 enabling exemptions generally or to a class of service-providers, can have no pretence to being saved by section 58 of Special Economic Zones Act, 2005. Moreover, such saving is founded on lack of inconsistency in the secondary legislation and it has been held by the Tribunal that it is that very inconsistency which led to discarding of provisions in the impugned notification that insist upon restriction not contemplated in section 26 of Special Economic Zone Act, 2005. The application is devoid of merit and deserves to be rejected.

Summary

Issues Involved:
The issues involved in this case include the authority for seeking review of an order, consideration of Special Economic Zones Act, 2005 in a service tax appeal, and the application for rectification of mistakes.

Review Application and Rectification of Mistakes:
The judgment highlighted the unusual turn of events where the Revenue presented the case as a 'review application' and 'application for rectification of mistakes' after the matter had been taken to the Hon'ble Supreme Court. The Tribunal clarified that seeking a review of their own order was not authorized by the relevant laws. The Revenue's portrayal of events was criticized by the Tribunal, emphasizing that the appeal withdrawal was at the Revenue's request.

Alleged Non-Consideration of SEZ Act:
The main issue was the alleged non-consideration by the Tribunal of section 26(2) and section 58 of the Special Economic Zones Act, 2005 in a service tax appeal. The Tribunal's order had set aside the demand on the appellant for services provided after January 2006 based on the SEZ Act. The Revenue contended that the Tribunal's decision was made without full consideration of the SEZ Act, which was disputed by the Tribunal.

Contention and Error Analysis:
The Revenue argued that an error had occurred due to the non-consideration of specific sections of the SEZ Act, leading to a different outcome. The Tribunal pointed out that the Revenue failed to appreciate the institutional mechanism and context of the SEZ Act. The judgment highlighted the operational aspects of the SEZ Act and the rules governing exemptions, drawbacks, and concessions for developers and entrepreneurs.

Scope of SEZ Act and Mistakes Rectification:
The Tribunal explained the provisions of the SEZ Act regarding exemptions from duties and taxes on goods and services. It emphasized that the exemption from service tax is linked to the deployment for 'authorized operations' as defined in the SEZ Act. The judgment criticized the Revenue's application for not understanding the scope of the SEZ Act and the implications of section 26(2).

Legal Analysis and Conclusion:
The judgment delved into the legal framework of the SEZ Act, its relation to previous statutes, and the continuity of notifications under the Act. It concluded that the Revenue's application lacked merit and should be rejected based on the inconsistency with the SEZ Act provisions. The order was pronounced in the open court on 24/08/2023.