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IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH
V. RAMASUBRAMANIAN, P. KESHAVA RAO, JJ.
M/s. GMR Aerospace Engineering Limited & Another - Appellant
Versus
Union of India, through the Secretary, Ministry Of Commerce & Industry, SEZ Section, New Delhi & Others - Respondent
Writ Petition No. 13546 of 2018
Decided On : 27-12-2018
Finance Act, 1994 – Section 73 (2) – Challenging an Order-in-Original passed by Commissioner of Central Tax – Confirming demand of service tax – Challenging notifications issued by Government of India – Held, Circular and amendment to Rules, it machinery provisions for working out refund, drawback etc., are not available either in SEZ Act or Rules framed thereunder and that therefore, operation of Act is subject to provisions of other enactments – Though “section title” to Section 26 reads as “exemptions, drawbacks and concessions”, and also empowers Central Government to prescribe both manner in which as well as conditions subject to which exemptions may be granted – Therefore area relating to exemption is completely occupied by rules – SEZ Act clearly indicates persons who are entitled to benefit of exemptions – Act also lists out duties from which exemption is granted – Act enlists operations or activities in respect of which exemption is available – Therefore, Order-in-Original set aside and notifications in question in so far as they relate to Special Economic Zones, are set aside – Writ petition allowed. (Para 41, 42 and 44)
Facts of the Case:
Challenging an Order-in-Original passed by the Commissioner of Central Tax (5th respondent), confirming demand of service tax for period October, 2011 to March, 2016 levied in terms of Section 73 (2) of Finance Act, 1994 and also challenging three notifications issued by Government of India Hence this Writ Petition.
Findings of the case:
Circular and amendment to Rules, it machinery provisions for working out refund, drawback etc., are not available either in SEZ Act or Rules framed thereunder and that therefore, operation of Act is subject to provisions of other enactments – Though “section title” to Section 26 reads as “exemptions, drawbacks and concessions”, and also empowers Central Government to prescribe both manner in which as well as conditions subject to which exemptions may be granted – Therefore area relating to exemption is completely occupied by rules – SEZ Act clearly indicates persons who are entitled to benefit of exemptions – Act also lists out duties from which exemption is granted – Act enlists operations or activities in respect of which exemption is available – Therefore, Order-in-Original set aside and notifications in question in so far as they relate to Special Economic Zones, are set aside
Result: Writ petition allowed
V. RAMASUBRAMANIAN, J.
1. Challenging an Order-in-Original passed by the Commissioner of Central Tax (5th respondent), confirming the demand of service tax for the period October, 2011 to March, 2016 levied in terms of Section 73 (2) of the Finance Act, 1994 and also challenging three notifications issued by the Government of India, the petitioners have come up with the above writ petition.
2. Heard Mr. S. Niranjan Reddy, learned senior counsel appearing for the petitioners and Smt. Sundari R. Pisupati, learned senior standing counsel appearing for the respondent-Department.
3. The 1st petitioner is engaged in the business of development of MRO facilities for various types of aircrafts as a Co- Developer. The 2nd petitioner is a Developer of GMR Hyderabad Aviation SEZ.
4. The 2nd petitioner was incorporated in December 2007 and was appointed as a Developer of GMR Aviation SEZ and was issued with a Certificate dated 31-05-2010 by the office of the Development Commissioner, who is the 4th respondent herein.
5. The 1st petitioner is a unit set up in the GMR Aviation SEZ and they happen to be a Co-Developer-cum-Unit for maintenance, repair and overhaul services and facilities for various types of aircrafts. The 1st petitioner was approved as a Co-Developer by a Letter of Approval dated 20-09-2010. The 4th respondent also issued a certificate dated 29-09-2010 to the 1st petitioner, by which the services consumed within the SEZ for carrying out authorised operations were exempt from the levy of service tax.
6. The 2nd petitioner entered into a sub-lease agreement with the 1st petitioner on 01-06-2010 for rendering the services of (1) lease of land of an extent of 24.55 acres for setting up MRO facilities, (2) supply of electricity for commercial operations and (3) supply of water for commercial operations. It is relevant to note here that a lease from the Developer is required under Rule 11 (5) and Rule 18 (2) (ii) of the SEZ Rules.
7. For the services rendered by them, the 2nd petitioner has been raising invoices on the 1st petitioner and they have also been filing their returns and availing exemptions. No service tax is charged and as a consequence, Form A1 and A2 are not filed by the 2nd petitioner, as required by three notifications issued respectively on 01-03-2011, 20-06-2012 and 01-07-2013.
8. However, the concerned authorities of the service tax demanded these forms, to grant the benefit of exemptions and hence, the 1st petitioner requested the issue of the relevant forms with effect from 01-06-2010. But, the Board of Approval, in their meeting held on 08-03-2017 rejected the appeal of the petitioners for the issue of Forms A1 and A2 on the ground that these forms cannot be issued with retrospective effect.
9. Thereafter, the 5th respondent issued a show cause notice dated 12-04-2017 to the 2nd petitioner alleging that the 2nd petitioner was providing the services of the renting of immovable property to the 1st petitioner without obtaining copies of Forms A1 and A2 and that therefore, there was contravention of the provisions of the Finance Act, 1994 resulting in the 2nd petitioner becoming ineligible for the grant of exemption in terms of the notifications.
10. Challenging the order of the Board of Approval dated 08- 03-2017 communicated by the letter of Ministry dated 06-04-2017 and also challenging the show cause notice, the petitioner filed a writ petition. The writ petition was disposed of by an order dated 03-01- 2018 directing the 5th respondent to consider the case of the petitioners with all objectivity and to pass orders after giving an opportunity of personal hearing.
11. Thereafter, the petitioners filed their objections. However, the 5th respondent passed an Order-in-Original dated 20-02-2018 confirming the demand and also imposing a penalty under Sections 77 and 78 of the Finance Act. The main ground on wh
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