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2024 (8) TMI 13 - AT - Service TaxExemption from payment of service tax - specified service in terms of N/N. 09/2009-ST dated 03.03.2009 read with N/N. 17/2011-ST dated 01.03.2011 or not - signage income received while renting out space for the signages to the units in the SEZ area - HELD THAT - If a developer has to enjoy the exemptions available under section 26 of the SEZ Act, its operations should be authorised by the Board under Section 4 and it should meet the manner, terms and conditions laid down under the SEZ Rules. Similarly, if a unit located in the SEZ has to enjoy the exemptions available under Section 26; its operations must be authorised by the Development Commissioner under Section 9 and it should meet the manner, terms and conditions prescribed under the SEZ Rules. For exemption from the service tax, the concerned SEZ Rules are Rules 22 and 31. While the SEZ Act itself provides for exemption from service tax (as well as Central Excise duty and Customs duty), exemption notifications were also issued by the Government under the respective laws with some conditions. The exemption notifications in dispute in this case are service tax exemption notifications ST-40/2012 dated 20.06.2013 and ST12/2013 dated 01.07.2013. This Tribunal also in the case of M/S. DLF ASSETS PRIVATE LIMITED VERSUS PRINCIPAL COMMISSIONER OF GOODS SERVICE TAX, DELHI NORTH 2023 (7) TMI 881 - CESTAT NEW DELHI , has considered the issue as to whether the services rendered by the appellant to units in SEZ would be exempted from payment of service tax in view of the provisions of the SEZ, Act and the notification to this effect.The Tribunal in this decision has held ' The prescribed manner as mentioned in Section 26(2), has been provided under Rule 31 of the SEZ Rules, whereby it is stated that exemption from payment of service tax shall be to any service provider for the authorized operations in a Special Economic Zone.' The notification has imposed a condition which is contrary to the overall exemption provided in the statute itself by virtue of Section 26 read with Rule 31. The exemption notification cannot override the statue - Otherwise also, the provisions of SEZ Act have the overriding effect in terms of Section 51 of the Act as already mentioned above. By virtue of Section 51 of the SEZ Act, the provisions of the SEZ Act and the SEZ Rules are mandated to have overriding effect over the provisions contained in any other Act. Therefore, all the activities relating to SEZ shall be guided by the provisions contained in the SEZ Act and the SEZ Rules. The present show cause notice raised demand holding that the activities of the appellant are classifiable under sale of space or time for advertisement service as defined under Section 65 (105) (zzzm) of the Act and not under Renting of immovable property service as defined under 65 (105) (zzzz), and exemption is not available on sale of space or time for advertisement services as same is not covered under the list of approved/authorized services - the present show cause notice was issued for period 2014-15 i.e. for the negative list regime where classification based levy ceased to exist. Thus, demand was proposed, confirmed and upheld by involing/examining obsolete provisions and even without refering to Section 65B (44) of the Act - In the present case, It is not the advertisement broadcast by radio or television, hence the exemption from payment of service tax for the impugned activity of appellant is otherwise available w.e.f. 01.07.2012. The findings of the adjudicating authority below are held contrary to the position of statute (SEZ Act and Rules). The adjudicating authority has failed to observe the judicial discipline by ignoring the previous decisions in appellant s own case - the department itself has dropped the demand on same demand which has not been considered in the present case - the impugned order is set aside - appeal allowed.
Issues Involved:
1. Classification of signage income. 2. Eligibility for service tax exemption under SEZ Act and related notifications. 3. Validity of adjudicating authority's reliance on notifications over SEZ Act provisions. 4. Applicability of negative list provisions for service tax exemption. Issue-wise Detailed Analysis: 1. Classification of Signage Income: The appellant, M/s. DLF Assets Pvt. Ltd., classified signage income under 'Renting of Immovable Property Service' and claimed exemption from service tax. The department contended that the signage service should be classified under 'Advertisement Service' as per Section 65(105)(zzzm) of the Finance Act, 1994, which is not exempt under the relevant SEZ notifications. 2. Eligibility for Service Tax Exemption under SEZ Act and Related Notifications: The appellant argued that the services provided to SEZ units are exempt under Section 26 of the SEZ Act, 2005, which overrides other laws due to Section 51 of the SEZ Act. The appellant cited previous favorable judgments, including their own case (2020 (11) TMI 35-CESTAT New Delhi), and argued that the exemption should be granted as per SEZ Act provisions, not limited by the conditions of Notification No. 09/2009-ST and Notification No. 17/2011-ST. 3. Validity of Adjudicating Authority's Reliance on Notifications Over SEZ Act Provisions: The Tribunal noted that the SEZ Act and SEZ Rules have an overriding effect over other laws (Section 51 of SEZ Act). The Tribunal referred to the Andhra Pradesh High Court's judgment in GMR Aerospace Engineering Limited (2019 (8) TMI 748) and previous Tribunal decisions, which held that SEZ Act provisions for service tax exemption prevail over conflicting notifications. The Tribunal emphasized that the SEZ Act's statutory scheme grants exemptions to authorized operations in SEZs, and any conflicting notification conditions are invalid. 4. Applicability of Negative List Provisions for Service Tax Exemption: The Tribunal observed that the classification-based levy ceased to exist post-2012 with the introduction of the negative list regime. Clause (g) of Section 66D exempts 'selling of space or time slot for advertisement other than advertisements broadcast by radio or television' from service tax. The Tribunal held that the appellant's activity falls under this exemption from 01.07.2012, not 01.10.2014 as contended by the adjudicating authority. Conclusion: The Tribunal concluded that the adjudicating authority's findings were contrary to the SEZ Act and Rules, and failed to follow judicial discipline by ignoring previous favorable decisions in the appellant's case. The order under challenge was set aside, and the appeal was allowed, affirming the appellant's entitlement to service tax exemption on signage income under the SEZ Act and related provisions. [Order pronounced in the open Court on 12.07.2024]
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