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TMI Blog2020 (11) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... any exemption from service tax. Section 26(2) of the SEZ Act does provide that the Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions shall be granted to the Developer under sub-section (1) but what is important to notice, is that, the word prescribe would mean prescribed by rules made by the Central Government under the SEZ Act, in view of the definition of prescribed under section 2(w) of the SEZ Act. The Notification dated March 3, 2009, which has been issued under section 93 of the Finance Act, therefore, has no application. Signage income - HELD THAT:- Under the agreement, the appellant rented out office space in the two SEZ units in return for a specified rent amount and in addition also rented out some space to these units for displaying their name for identification purpose, for which the applicant charged signage charges - In the first instance, irrespective of classification of the said service, the said service had been used by the SEZ units for their authorized operations. There is no dispute on this aspect either in the show cause notice or the impugned order. In such circumstances, such servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act has been prescribed by Notification dated March 3, 2009, but the appellant did not follow the conditions prescribed therein and, therefore, was liable to pay service on the rent received from the SEZ units. The Commissioner further held that the appellant had classified signage income as sale of space or time for advertisement service and so it was not entitled to claim exemption as the said income was not covered under the list of approved services. 5. This appeal has, accordingly, been filed to challenge the confirmation of demand on the aforesaid two services. 6. Shri Narender Singhvi, learned counsel appearing for the appellant has made the following submission:- (i) The services rendered by the appellant to SEZ units are exempt from payment of service tax under the overriding provisions of the SEZ Act. In support of this submission, learned counsel has placed reliance upon certain decisions, to which reference shall be made at the appropriate stage; (ii) The Commissioner held that the exemption provided under the SEZ Act has been prescribed by Notification dated March 3, 2009, but the said Notification has been issued in exercise of the powers conferred by sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d March 3, 2009, but the appellant did not follow the conditions prescribed therein and, therefore, was liable to pay service tax on renting of immovable property services to SEZ units. The Department also alleged that since the appellant had classified signage as sale of space or time for advertisement, it was not entitled to claim exemption. 11. In order to appreciate the contentions advanced by learned Counsel for the appellant and the learned Authorized Representative of the Department, it will be appropriate to refer to the relevant provisions. Section 26 of the SEZ Act deals with exemptions, drawbacks and concessions to every Developer and entrepreneur. The relevant provisions are reproduced below: 26. Exemptions, drawbacks and concessions to every Developer and entrepreneur.- (1) Subject to the provisions of sub-section (2), every Developer and the entrepreneur shall be entitled to the following exemptions, drawbacks and concessions, namely:- (a) ********** (b) ********** (c) ********** (d) ********** (e) exemption from service tax under Chapter V of the Finance Act, 1994 (32 of 1994) on taxable services provided to a Developer or Unit to carry on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t March, 2004, vide, G.S.R.248(E), dated the 31st March, 2004, except as respects things done or omitted to be done before such supersession, the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services specified in clause (105) of section 65 of the said Finance Act, which are provided in relation to the authorised operations in a Special Economic Zone, and received by a developer or units of a Special Economic Zone, whether or not the said taxable services are provided inside the Special Economic Zone, from the whole of the service tax leviable thereon under section 66 of the said Finance Act: Provided that (a) ********** (b) ********** (c) the exemption claimed by the developer or units of Special Economic Zone shall be provided by way of refund of service tax paid on the specified services used in relation to the authorised operations in the Special Economic Zone; (d) ********** (e) ********** (f) ********** (g) ********** 2. ********** (emphasis supplied) 15. Proviso (c) to the aforesaid Notification dated March 3, 2009 was amended by Notification dated Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by way of refund imposed under the Notification issued under the Finance Act would be inconsistent with the provisions of the SEZ Act. It also needs to be noted that the SEZ Act was enacted in 2005, much after the enactment of the Finance Act in 1994. 19. This issue was examined by the Telangana and Andhra Pradesh High Court in GMR Aerospace Engineering Limited and another Vs. Union of Inida and Others 2019(8)TMI 748. The second petitioner, a Developer of GMR Hyderabad Aviation SEZ, entered into a sub-lease agreement with the first petitioner for rendering certain services. It, however, claimed examination on the ground that under section 26(1)(e) of the SEZ Act, every Developer was entitled to exemption from service tax under Chapter-V on the Finance Act on taxable services provided to a Developer or unit to carry on the authorized operations in a SEZ and the same was not dependent upon the conditions stipulated in the Notification issued under section 93 of the Finance Act. 20. It is in this context that the Andhra Pradesh High Court observed as follows: 22. It may be noted that sub-section (1) of section-26 begins with the words subject to the provisions of sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise Act, 1944, the Central Tariff Act, 1985 and the Finance Act, 1994. This is especially so, since the authority of the Central Government to prescribe the terms and conditions subject to which exemptions may be granted under section 26(1), flows only out of sub-section (2) of section 26. The word prescribe is verb. Generally no enactment defines the word prescribe but the SEZ Act 2005 defines the word prescribe under section 2(w) to mean the rules framed by the Central Government under the SEZ Act, 2005. The space is also not left unoccupied, as the Central Government has issued a set of rules known as the Special Economic Zones Rules, 2006 , wherein the Central Government has prescribed the terms and conditions for grant of exemptions under rule 22. Therefore, there is no question of comparing the terms and conditions prescribed in rule 22 with the terms and conditions prescribed in the Notifications issued under any one of the five enactments listed in section 26(1) to find out whether there was any inconsistency. 34. The benefit of exemptions granted under the Notifications issued under section 93 of the Finance Act, 1994, are available to any one and not necessari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances, for the reasons stated above while dealing with the first issue, such service would be exempt from payment of service tax under the SEZ Act and the confirmation of demand of service tax on this service cannot be sustained. 24. Even otherwise, merely because the appellant had classified the said charges as received from service of sale of space or time for advertisement, would not mean that such service cannot be classified as renting of immovable property services. The classification of services has to be determined in accordance with the provisions of section 65A of the Finance Act and it is apparent that such service would be renting of immovable property service. 25. This apart, section 65(105) (zzzm) of the Finance Act defines taxable service of sale or space or time for advertisement to include providing space or time for displaying, advertising or showcasing of any product or service in video programmes, public places, buildings. Permission by the appellant to the lessee to put its name under the facade would not mean that the appellant has provided space to display, advertise or showcase any product or service. This activity, thus, for this reason also would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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