SEZ Act Section 26 exemption for services to SEZ units overrides service tax levy under Finance Act; procedural non-compliance in notifications does not defeat substantive statutory exemption due to Section 51 overriding effect.

SANJIV SRIVASTAVA:

This appeal is directed against Order-in-Appeal No.NOI-EXCUS-001-APP-342-24-25 dated 13/02/2025 passed by Commissioner (Appeals) Central Goods & Services Tax, Noida. By the impugned order following has been held:-

Order

In view of the aforesaid discussions and findings, the instant appeal No.54/ST/Noida/APPL/NOI/2024-25 dated 03.05.2024 filed by M/s Matrix Design Works, E-84, Sector-41, Noida (U.P.)-201301 falls to succeed and consequently rejected. Order-in-Original No.228/AC/ST/TPI/CGST/Div-I/Noida/2023-24 dated 29.02.2024 passed by the Assistant Commissioner, HQ, Technical, CGST Noida is upheld being legal and proper.‖

2.1 Appellant is registered with the Department under the Registration No.AFXPD9408HSD001 for providing taxable services as defined by Section 65B (44) of the Finance Act, 1994 read with Section 66B of the Act.

2.2 On the basis of third party information was received from Income Tax Department, discrepancies were noted on comparison of the ITR and ST-3 returns leading in payment of service tax as indicated in table below:-

2.3 Inquiries were made from the appellant and they were directed to furnish the details of payment of service tax along with copies of ST-3 returns & reason of difference of value as shown in service tax return & Income Tax return/Form 26AS. However, no response was received.

2.4 Show cause notice dated 26.03.2021 was issued to the appellant, asking them to show cause as to why:-

a. The Service Tax amounting to Rs.21,04,914/- (Rupees Twenty One Lakh Four Thousand Nine Hundred and Fourteen Only) should not be demanded and recovered from them under proviso to Section 73(1) of the Finance Act, 1994 read with Section 142 and Section 174 of CGST Act, 2017.

b. The due interest on the amount of Service Tax mentioned at (a) above should not be demanded and recovered from them under Section 75 of the Finance Act, 1994 read with Section 142 and Section 174 of the CGST Act, 2017.

c. Penalty should not be imposed upon them under Section 78 of the Finance Act 1994 for failure to pay service tax & suppressing the facts and value of taxable service with intent to evade payment of Service Tax.

d. Penalty should not be imposed upon them under Section 77(1)(c) of the Finance Act, 1994 read with Section 142 and Section 174 of the CGST Act, 2017 for not maintaining proper records.

2.5 The said show cause notice was adjudicated as per the Order-in-Original dated 29.02.2024 by holding as follows:-

ORDER

(I) I confirm the demand of Service Tax amount of Rs.21,04,914/-((Rupees Twenty One Lakh Four Thousand Nine Hundred Fourteen Only) including Cesses, and order to recover the same from M/s.Matrix Design Works, E-84, Sector-41, Noida- 201301 M/s Kuldip Kumar Sabhaerwal, 263, Sector- 37, Noida, Noida Complex, Gautam Budha Nagar, Uttar Pradesh-201301 under the proviso to Section 73(1) of the Finance Act, 1994 read with Section 142, Section 173 and Section 174 of the CGST Act, 2017.

(II) I order to recover the interest as applicable under Section 75 of the Finance Act, 1994 read with Section 142, Section 173 and Section 174 of the CGST Act, 2017 from the noticee on the above said amount of Service Tax as confirmed at (I) above.

(III) I impose a penalty of Rs.21,04,914/- (Rupees Twenty One Lakh Four Thousand Nine Hundred Fourteen Only)and order to recover the same from the noticee under Section 78 of the Finance Act, 1994 read with Section 142, Section 173 and Section 174 of the CGST Act, 2017. If the amount as determined under Section 73 above is paid within 30 days from the date of receipt of the order along with the interest payable thereon as per Section 75, penalty will be only 25% of the service tax determined under Section 73. The benefit of reduced penalty shall be available only if the amount of penalty so determined is also been paid within the period of 30 days from the receipt of the order.

(IV) I impose a penalty of Rs. 10,000/-(Rupees Ten Thousand Only) under Section 77(1)(c) of the Finance Act, 1944 r