ST - Notification No 17/2011-ST could not have eclipsed or restricted exemption provided by S.26(1)(e) of SEZ Act, 2005: CESTAT
By TIOL News Service
MUMBAI, NOV 28, 2018: THE Appellants are providing taxable services under the category of "Supply of Tangible Goods Services".
In case of supplies made to SEZ units/Developers/Main Contractors etc. for development of SEZ Units, they had claimed exemption under Notification No 9/2009-ST dated 3.3.2009 & 17/2011-ST dated 01.03.2011.
Pursuant to a SCN dated 19.12.2013, an order was passed by the CCE, Pune-I denying the exemption and confirming a service tax demand of Rs.2,61,20,477/- for the period 01.04.2009 to 31.03.2012, along with interest and penalty.
The denial is in respect of the services provided to the following entities -
+ M/s Tril Info Park Ltd (IT/ITES SEZ Developer), Chennai - the services have not been wholly consumed within the SEZ, because the accompanying invoices show the site as "TRIL Park Tarmani" whereas the accompanying log sheets show the site as "Tril Info Park" ?
+ M/s JSL Ltd., SEZ Developer, Bhubaneshwar - even though the services were provided by the Appellants to the SEZ Developer when he was notified as SEZ Developer, subsequently he was de-notified and consequently services provided were not wholly consumed in SEZ. ?[Incidentally, service tax of Rs.40,69,263/- was discharged by M/s JSL Ltd., on all the services availed by them from the appellants.]
+ Vedanta Aluminum Ltd., SEZ Unit - the services provided has not been wholly consumed in SEZ as these services have been provided to a unit who ?owns or carry on any business other than the operations in the SEZ.
+ Wardha Power Company Pvt. Ltd., SEZ Unit- The ?services provided were not included in the list of approved services during the period 2009-10 and 2010-11, and neither the name of appellant was mentioned in the list of approved service providers. Further the services were not wholly consumed in the SEZ.?
+ In respect of the remaining,the Commissioner observed that in those cases the services were not provided directly to the SEZ Unit or developer but to Contractor providing the services to the SEZ unit or developer.
The appellant is before the CESTAT.
It is submitted that the entire services of supply of tangible goods (Cranes) were used by the SEZ units/ Developers/ contractors within the SEZ unit as is evident from the Purchase Orders/ Contracts/ Certificates/ Declarations of the SEZ units/ Developers/ Contractors; tax invoices of the Appellant, log books duly and jointly signed by the representative of the Appellants and SEZ units/Developer/Contractors and such services are treated as ‘deemed exports' in view of section 2(m)(ii) of the SEZ Act, 2005 and as per rule 31 of the SEZ Rules, 2006 and, therefore, exempted. The appellant also argues on the ground of limitation. Inasmuch as their records were audited during the period 29.05.2009 to 02.06.2009 but the audit party didn't raise any objections and it was only after the second audit conducted in April 2012, for the period April 2009 to March 2011 that thepresent SCN was issued. In any case, if the tax is demanded from them, then the same will be admissible as refund to the SEZ/ Unit developer.
The AR argued that the exemption is inadmissible since the services were not provided to SEZ unit/Developer but to Contractor/Sub Contractor of the said unit or developer.
Case laws in abundance were cited by both sides to justify their claims.
The Bench considered the submissions and while inter alia relying on the decisions in Intas Pharma - 2013-TIOL-1091-CESTAT-AHMand Reliance Ports and Terminals Ltd. 2013-TIOL-1473-CESTAT-AHM observed thus -
+ It is quite evident that in terms of section 26(1)(e) of the SEZ Act, 2005 the taxable services provided by a service provider to a Developer or a Unit in SEZ are exempt from payment of service tax. Section 51 of the SEZ Act, 2005 gives overriding effect to the provisions of this Act over all other Acts and Rule 31 of SEZ Rules, 2005 provides the scheme for operationalizing the said exemption.
After reproducing the contents of the Notification No. 9/2009-ST as amended and notification 17/2011-ST (and the Circular 142/11/2011-ST issued in this regard), the CESTAT further observed -
++ Notification No 9/2009-ST as amended by the Notification No 15/2009-ST and subsequently Notification No 17/2011-ST issued under Section 93 of the Finance Act, 1994, could not have eclipsed or restricted the exemption provided by the Section 26(1)(e) of the SEZ Act, 2005.
++ From the perusal of the invoices and log sheets it is quite evident that each log sheet is signed jointly by the crane operator, user/ Client Site in Charge, Site Engineer/ Site Supervisor and Project Manager certifying the usage hours of tangible goods on daily basis at the respective site. These weekly log sheets are then made the basis for issuance of the invoice by the service provider to the service recipient.
++ There is no dispute that the sites in respect of which these invoices/ log sheets are, belong to the SEZ Unit or a developer and these services have been wholly consumed at the said site. Thus, in our view, the services provided by the appellant in respect of these sites have been provided by the appellant to the SEZ Unit or developer. Further, there appears to be no dispute also about the fact that these services are falling in the category of the approved services for the SEZ Operation, in respect of those SEZ Units/Developer.
++ Commissioner also has not sought to state the contrary but has only sought to deny the exemption on the ground that in these instances the exemption should not have been allowed affront but by way of the claim of refund by the SEZ Unit/ Developer.
++ However, from the plain wordings of the Section 26(1)(e) of SEZ Act, 2005 read with Rule 31 of The SEZ Rules, 2006, and notification No 9/2009-ST dated 03-03-2009 as amended by Notification No 15/2009-ST, we are of the view that Appellants have substantially complied with the conditions prescribed.
++ Since there has been substantial compliance, the order of Commissioner holding that these services have not been wholly consumed within the SEZ is not sustainable.
+ From the copies of such form A-1 (declaration prescribed by 17/2011-ST) from Tril Info Park Ltd, India Bulls Realtech Limited and M/s ONGC Petro Additions Ltd, it is quite evident that these services have been wholly consumed by them and that they do not own or carry out any other business of providing taxable service or manufacture in Domestic Tariff Area. From the above certificates also it is quite evident that these services have been wholly consumed for authorized operations by the SEZ Unit/ Developer.
++ This tribunal has in series of casesheld that exemption shall be available even if the services for consumption in SEZ by the SEZ Unit/ Developer are provided through the Contractor of SEZ Unit/ Developer. [FEDCO Paints and Contracts - 2017-TIOL-2726-CESTAT-MUM relied upon]
The Appeal was allowed on merits without going into the aspect of limitation.
(See 2018-TIOL-3581-CESTAT-MUM)
