Substantive statutory exemptions granted under the SEZ Act cannot be denied based on the non-fulfillment of procedural requirements, such as the non-filing of Form A-1 or A-2, as the SEZ Act overrides inconsistent provisions of the Finance Act.

[Order per: ANGAD PRASAD]

This appeal has been filed by M/s Srisun Exim Services (hereinafter referred to as the appellant) against Order-in-Appeal dt.26.06.2024, whereby, the Commissioner (Appeals) partly upheld the department’s appeal and confirmed service tax demand of Rs.1,43,523/-, together with applicable interest and penalty, on the ground that the appellant failed to produce Form A-2 for the Financial Year 2016-17 in respect of services rendered to an SEZ unit. The Commissioner (Appeals) also upheld levy of late fee for delayed filing of ST3 returns.

2. The facts, in brief, are that the appellant is registered with the service tax department and is engaged in providing Business Auxiliary Service, Cargo Handling Service and Goods Transport Agency Service. A Show Cause Notice was issued alleging short-payment of service tax on the basis of difference between the turnover reflected in Form 26AS and the turnover declared in the ST3 returns.

3. The Adjudicating Authority, after detailed verification of invoices, books of accounts and supporting records, found that the difference represented non-taxable reimbursements, transportation expenses incurred on behalf of customers, freight forwarding charges and supplies made to SEZ units. It further recorded a categorical finding that service tax had already been discharged on the taxable component and accordingly, dropped the proceedings.

4. The department preferred an appeal. The Commissioner (Appeals) agreed with the adjudicating authority regarding reimbursements and taxable turnover but held that exemption relating to services provided to the SEZ unit was inadmissible because the appellant had not produced Form A-2 for the relevant year. Consequently, service tax of Rs.1,43,523/- was confirmed.

5. Heard both sides and perused the recrods.

6. The principle issue for determination is whether exemption available in respect of taxable services provided to SEZ unit can be denied solely because Form A-2 pertaining to the relevant financial year was not furnished.

7. After considering rival submissions and examining records, we find that there is no dispute regarding the following facts:

a) The services were admittedly rendered to an SEZ unit;

b) The services were utilized for authorized operations of the SEZ unit;

c) The Commissioner (Appeals) has not disputed the nature of the services or their utilization within the SEZ;

d) The exemption has been denied only because Form A-2 for the relevant financial year was not produced.

Therefore, the controversy is confined only to the effect of non-submission of Form A-2.

8. The issue is no longer res integra. The Hon’ble Andhra Pradesh High Court in the case of GMR Aerospace Engineering Ltd Vs UOI [2019 (31) GSTL 596 (AP)], while considering identical notifications issued under section 93 of the Finance Act, 1994, held that;

 Section 26 of the SEZ Act grants a substantive statutory exemption.

 The conditions governing such exemption can only be prescribed under the SEZ Act and thus, SEZ Rules.

 The Executive cannot curtail or deny the statutory exemption by imposing additional procedural requirements through notifications issued under the Finance Act.

 Non-filing of Form A-1 or A-2 cannot result in denial of exemption otherwise available under the SEZ Act .

 The SEZ Act being a special enactment overrides inconsistent provisions by virtue of section 51 of the Act.

9. The above judgment has attained finality after being affirmed by the Hon