2018 (7) TMI 334 - AT - Service Tax

Services rendered to SEZ unit - Benefit of N/N. 4/2004-ST dated 31.03.2004 - denial on the ground that the services are not consumed within SEZ - whether the appellants are eligible for the service tax exemption under the N/N. 4/2004 for the services rendered to SEZ unit? - Held that - The intention of the notification as well as Section 26 of the SEZ Act, is to exempt the taxes/duties payable on goods and services provided to SEZ unit/developer, the supply of goods and services to SEZ being deemed exports. Therefore, taking into consideration the impact of Section 51 of the SEZ Act which provides for overriding effect over any other law, the benefit of tax exemption cannot be denied by giving a restrictive interpretation to N/N. 4/2004. The notification which superseded N/N. 4/2004 has categorically stated that whether or not the taxable services are provided inside the SEZ the exemption is available. Even if the event is held outside, since the services were for advertisement of product of SEZ, the services provided is to be considered as consumed within SEZ. It also needs to be mentioned that for availing the services, the SEZ has to get these services approved by the Development Commissioner - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility for service tax exemption under Notification No. 4/2004 for services rendered to SEZ unit.

Analysis:
The appellant, engaged in "Event Management Service," claimed exemption under Notification No. 4/2004 for services provided to an SEZ unit. The dispute arose as the authorities contended that the services were not consumed within the SEZ, leading to a demand for service tax, interest, and penalties. The appellant argued that the notification does not require services to be rendered within the SEZ's geographical location, emphasizing that services used for SEZ operations, like exporting goods, should be considered consumed within the SEZ. They invoked Section 51 of the SEZ Act 2005, stating that SEZ units are eligible for service tax exemption for authorized operations, including exporting goods. The appellant highlighted that previous and subsequent notifications did not impose restrictions on service consumption within the SEZ, citing legal precedence to support their interpretation.

The respondent, however, maintained that Event Management Services were conducted outside the SEZ unit, making them ineligible for exemption under Notification No. 4/2004, which requires services to be consumed within the SEZ. The authorities upheld this view, leading to the appeal.

The Tribunal analyzed the issue of eligibility for service tax exemption under Notification No. 4/2004 in light of the SEZ Act provisions. They noted that the SEZ Act, with its overriding effect under Section 51, aims to provide exemptions and concessions for goods and services supplied to SEZ units. Considering the broader intent of the legislation and subsequent notifications, the Tribunal held that a restrictive interpretation of the notification, requiring services to be consumed within the SEZ, was unwarranted. They emphasized that the subsequent notification, No. 9/2009, explicitly stated that services need not be provided inside the SEZ for exemption. In the case at hand, where Event Management Services promoted an SEZ unit's product, even if conducted outside the SEZ, the Tribunal deemed them consumed within the SEZ, ensuring eligibility for the exemption. The Tribunal set aside the impugned order, allowing the appeal with consequential benefits as per the law.

In conclusion, the Tribunal's decision centered on interpreting the service tax exemption notification in conjunction with the SEZ Act provisions, emphasizing the broader legislative intent to support SEZ units and their operations, ultimately ruling in favor of the appellant's eligibility for the exemption.