The Special Economic Zones Act, 2005, specifically Section 26 and Section 51, takes precedence over the Finance Act, 1994, granting exemptions from service tax for all services provided to SEZ units for authorized operations, regardless of the physical consumption location of the service.

Per: Pullela Nageswara Rao

This Appeal is filed against the Order-in-Appeal No.113/2014 dated 05.02.2014 passed by the Commissioner of Central Excise (Appeals-II) Bangalore, whereby the demand of service tax amounting to Rs. 1,09,671/-, along with applicable interest and penalties, was upheld.

The brief facts are the demand pertains to the provision of services as an 'Air Travel Agent' by the Appellant to clients located in Special Economic Zones (SEZs) during the period from April 2008 to March 2009. Alleging that the "Air Travel Agent Services' cannot be said to have been consumed within the said SEZ area, inasmuch as the same are used for travelling outside the SEZ area, as per Notification No. 4/2004-ST dated 31.03.2004 and that the appellant is not eligible for the benefit of notification, proceedings were initiated and show cause notice was issued to the appellant. On Adjudication the adjudicating authority confirmed the demand along with the interest and imposed penalty and the same was upheld on appeal by Commissioner (Appeals). Aggrieved by the impugned order this appeal is filed before the Tribunal.

The learned counsel for the appellant during the hearing submits that during the adjudication proceedings the Appellant had submitted that the services provided to SEZ units are exempt from the levy of service tax. However, both the Learned Adjudicating Authority and the Commissioner (Appeals) overlooked the statutory mandate under Sections 26(1) and 51(1) of the Special Economic Zones Act, 2005 (SEZ Act,2005), which confer overriding effect and provide for exemption from service tax on services rendered to SEZ unit. The Relevant text of section 26 of SEZ Act, 2005 is reproduced as under: -

26. Exemptions, drawbacks and concessions to every Developer and entrepreneur.

26.(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) exemption from any duty of customs, under the Customs Act, 1962 or the Custom Tariff Act, 1975 or any other law for the time being in force, on goods imported into, or service provided in, a Special Economic Zone or a Unit, to carry on the authorised operations by the Developer or entrepreneur;

(b) exemption from any duty of customs, under the Customs Act, 1962 or the Customs Tariff Act, 1975 or any other law for the time being in force, on goods exported from, or services provided, from a Special Economic Zone or from a Unit, to any place outside India:

(c) exemption from any duty of excise, under the Central Excise Act, 1944 or the Central Excise Tariff Act, 1985 or any other law for the time being in force, on goods brought from Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorised operations by the Developer or entrepreneur;

(e) exemption from service tax under Chapter-V of the Finance Act, 1994 on taxable services provided to a Developer or Unit to carry on the authorised operations in a Special Economic Zone;

51. Act to have overriding effect.

51.(1) 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.

The learned counsel submits that; SEZ Act has overriding effect; the issue regarding the overriding effect of the SEZ Act, 2005 has been conclusively settled by this Hon'ble Tribunal in a catena of decisions, wherein it has been consistently held that the provisions of the SEZ Act, 2005 prevail over those of the Finance Act, 1994, to the extent of any inconsistency; some of the relevant decisions of the Hon'ble Tribunal, in addition to those already placed on record and relied upon by the Appellant, are hereunder:

a) Pragathi Concepts Vs. Commissioner of Central Tax, Bengaluru - 2024 (11) TMI 1344 - CESTAT BANGALORE - Final Order No. 21157/2024 in Service Tax Appeal