Sulekha Beevi C.S., Member (J)
1. Brief facts of the case are that the appellant is engaged in the manufacture of Metal Halide Lamps. They are exporting most of their production and a small volume is sold in the Domestic Tariff Area (DTA) on payment of appropriate duty. For clearing the goods to the Domestic Tariff Area they have availed Goods Transport Agency Services. On verification of accounts, it was noted that the appellant had not discharged Service Tax under GTA Services which was payable by them. The Show Cause Notice dated 10.03.2010 was issued proposing to demand the Service Tax under GTA Services along with interest and for imposing penalties. After due process of law, the original authority confirmed the demand, interest and imposed penalties. On appeal the Commissioner (Appeals) upheld the same. Hence this appeal.
2. On behalf of the appellant Ld. counsel Shri M. Karthikeyan appeared and argued the matter.
The Ld. counsel adverted to the Show Cause Notice and submitted that actually the appellant is not rendering any Goods Transport Agency Services and the Show Cause Notice proposes to demand the Service Tax as if the appellant is the provider of such services. The appellant had availed the GTA Services for transport of the goods from the SEZ to the Domestic Tariff Area. On reverse charge basis as a recipient of services, the appellant has to make part of the payment 25% of the value of the freight charges paid for GTA Services. The appellant being an SEZ unit is exempted from paying Service Tax on input services, as per the Notification No. 4/2004. Though this contention was put forward before the authorities below, the same was not accepted stating that the services have been availed outside the SEZ zone and that as per Notification No. 4/2004, the consumption of the services should be within the SEZ zone itself. The Ld. counsel adverted to the Notification No. 4/2004 and stated that there is nothing in the Notification which says that the input services have to be availed and consumed within SEZ area itself so as to avail the benefit of an exemption. The input services can be availed outside the SEZ zone also and there is no geographical limitation in the case of input services. Section 51 of the SEZ ACT was also relied upon by the Ld. counsel to argue that the said Section gives an overriding effect and therefore the benefit of exemption as per the Notification ought to be granted. The decision in the case of M/s. SRF Ltd. Vs. Commissioner of Central Excise [2018 (6) TMI 387-CESTAT NEW DELHI] was relied to argue that on the very same issue in regard to GTA Services, the Tribunal has held that even if it is availed outside the SEZ zone the exemption would be available. Section 26 of the SEZ Act provides that all taxes and duties are exempt under SEZ unit. The decision in the case of M/s. Vision Pro Event Management vs. Commissioner of Central Excise & Service Tax [2018 (7) TMI 334-CESTAT CHENNAI] was relied to argue that even if services in the nature of advertisement of product of SEZ etc., are provided outside the SEZ zone the same is eligible for benefit of exemption. The Ld. counsel prayed that the appeal may be allowed.
3. The Ld. Authorized Representative Ms. Anandalakshmi Ganeshram supported the findings in the impugned order. The Notification No. 4/2004 was adverted to by the Ld. counsel to argue that as per the Notification, the services have to be consumed within the SEZ area and therefore the exemption is not eligible. It is prayed that the appeal may be dismissed.
4. Heard both sides.
5. On perusal of the Show Cause Notice, it is seen that the demand is raised as if the appellant has rendered the GTA Services. In fact the appellant has availed GTA Services for clearances of goods from the SEZ zone to the DTA area. The appellant would be liable to pay the Service Tax only under Reverse Charge basis. There is a factual error in the Show Cause Notice in raising the demand itself.
6. The appellant being a SEZ unit is not liable to pay any taxes and duties as per the provision under Section 26 of the SEZ Act. Further, Section 51 of the said Act has an overriding effect. The decision in the case of M/s. SRF Ltd. (supra) has considered the very same point, the relevant part is extracted as under:-
“13. It can be clearly seen that Section 26 (1) (e) provides the exemption from Service Tax leviable under Chapter V of the Finance Act, 1994 on the services provided to a developer to carry on the authorized operations However, the said exemption is subject to sub-Section (2) thereof which states that the said exemption, concession, drawback and other benefits provided under sub-section (1) shall be provided as per the manner prescribed by the Central Government. The word 'prescribed is very much defined in SEZ Act, 2005 itself to mean, prescribed by the Rules laid by the Central Government under this Act. Section 65 of sub-section (x) of SEZ Act provides that Central Government shall make Rules to put forth the manner in which exemptions, concessions, drawbacks and other benefits shall be granted in pursuance of the above provision Rule 31 of SEZ Rules provided that the exemption from payment of Service Tax on taxable service specified in Section 65 of Finance Act, 1994 and rendered to a developer or a unit by any service provider shall be available for authorized operation in Special Economic Zone. As a result, the appellant being a unit in special economic zone shall be entitled for exemption in furtherance of Section 26 (1) (e) read with Section 26 (2) of SEZ Act and read with Rule 31 of SEZ Rules, 2006. Thus, the Commissioner (Appeals) has not only invoked SEZ Act in abeyance of SCN but has also wrongly adjudicated the same.
14. Though in the preset case, the Commissioner while upholding the order of Assistant Commissioner has relied upon certain circular but Section 51 of SEZ Act, 2005 provides the Act to have an overriding effect over the provisions contained in any other Act. Therefore, all the activities relating to Section shall be agreed by the provisions contained in SEZ Act and SEZ Rules. Since this act provides for exemption from service Tax payable under the Finance Act, 1994 on the taxable services provided to a developer or unit to carry on the authorised operations in the said economic zones the unit is entitled for exemption and if any tax liability has been discharged, such unit is entitled for the refund thereof. Further, the order of Commissioner (Appeals) holding that the services rendered by the appellant do not amount to consumption within the Special Economic Zone as is mandate in furtherance of Circular No. 4/2004-ST dated 31st March, 2004 thereby upholding the service tax liability of the appellant is a wrong finding to our opinion as that the said Notification being a conditional exemption Notification Issued under Section 93 of the Finance Act 1994 cannot be interpreted on the basis of the provisions of SEZ Act. 2005 or the Rules made there-under and the conditions specified therein have to be fully satisfied for availing the benefit under the said Notification. Also the Notification came into force much before the Special Economic Zones Act or the Rules made there-under. Had the intention of Legislature was to align the exemption with Section 26 of SEZ Act or Rule 31 of SEZ Rules then Notification No. 4/2004-ST would have been amended to reflect the same. No such amendment has been carried out in the said Notification. As such, we are of the firm opinion that the Notification as relied upon by the Commissioner (Appeals) to pass an order against the appellant has wrongly relied upon. We draw our support from the case Norasia Container Lines vs. Commissioner of Central Excise, New Delhi 2011 (23) STR 295 (Tri- Del.) wherein, it was held that the services relating to supply of goods in SEZ are exempted from payment of Service Tax. It was held that consumption of services within Special Economic Zone is intended to bear the utilization by the entities within the special economic zone. By no stretch it can be stated that it intends to restrict such exemption only to the extent that its consumption to be within the geographical boundaries of Special Economic Zone.”
7. The Tribunal in the case of M/s. Vision Pro Event Management (supra) had also considered the issue whether exemption from Service Tax is eligible when the services are availed outside to the SEZ zone. The relevant Paragraph reads as under:-
“5.1 The issue is whether the appellants are eligible for the service tax exemption under the Notification No. 4/2004 for the services rendered to SEZ unit. For better appreciation, the relevant part of the notification is reproduced as under :-
"......the Central Govt. being satisfied that it is necessary in the public interest so to do, hereby exempts taxable service of any description as defined in clause (105) of Section 65 of the said Act provided to a developer of Special Economic Zone or a unit (including a unit under construction) of Special Economic Zone by any service provider for consumption of the services within such Special Economic Zone, from the whole of service tax leviable thereon under Section 66 of the said Act,........"
The doubt has arisen as the notification uses the words "consumption of services within Special Economic Zone". The period involved is February, 2008. SEZ Act, 2005 has come into force w.e.f. 10-2-2006. Section 26 of the Act provides for various exemptions and concessions to SEZ unit/developers. Section 51 lays down that the SEZ Act will have overriding effect over any other Act for the time being in force. The relevant section is reproduced as under :-
"51. Act to have overriding effect - The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act."
5.2 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, we are of the considered opinion that the benefit of tax exemption cannot be denied by giving a restrictive interpretation to Notification No. 4/2004. Our view is supported by the fact that the notification which superseded Notification No. 4/2004 has categorically stated that whether or not the taxable services are provided inside the SEZ the exemption is available. The relevant portion of the Notification No. 9/2009 is reproduced as under :-
"In exercise of the powers conferred by sub-section (1) of Section 93 of the Finance Act, 1994 (32 of 1994), and in supersession of the notification of the Govt. of India, Ministry of Finance (Department of Revenue), No. 4/2004-ST, dated 31-3-2004, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) dated the 31-3-2004, vide G.S.R 248 (E), dated 31-3-2004, except as respects things done or omitted to be done before such supersession, the Central Govt., 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 authorized 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 hereon under Section 66 of the said Finance Act."
6. There may be services which are wholly consumed within the geographical location of SEZ or partially: consumed in the SEZ. In the present case, the appellant provided event management services to the SEZ unit. The SEZ unit was a co-sponsor for the event which helped advertising of product of SEZ. The event was held outside the SEZ unit. 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. The department then cannot contend that these services are not eligible for refund since these are not consumed within SEZ. From the above discussions, we are of the considered opinion that the denial of benefit is unjustified. The impugned order is set aside. The appeal is allowed with consequential benefits, if any, as per law.
8. After considering the facts and evidences placed before us and following the ratio laid in the decisions, we are of considered opinion that the demand cannot sustain and requires to be set aside. Ordered accordingly.
9. In the result, the impugned order is set aside. The appeal is allowed with consequential relief, if any, as per law.
