The Ahmedabad bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that duty exemption benefits under Special Economic Zones (SEZ), 2005 cannot be denied merely on procedural lapse.
Anjani Excavation Operation, the appellant is registered with the Service Department for taxable services viz. „Site formation and clearances, excavation and earthmoving and demolition” Service. During the course of the audit of the record of the appellant, it was noticed that M/s ONGC Petro Additions Ltd. (M/s OPAL), a SEZ unit had appointed M/s. IVRCL Infrastructure and Project Ltd. (M/s IVRCL) as a contractor for carrying out work and providing services as per their contract.
In turn, M/s IVRCL have entered into a sub-contract with Appellant for performing various works such as Excavation Services, Soil Filling Services etc. falling under the category of “Site Formation and clearance, excavation and earthmoving and demolition” Services, to be carried out at the site of M/s OPAL, Dahej.
In terms of the contract, the appellant has provided service to M/s IVRCL and they did not pay the service tax, as services were provided to SEZ units i.e. M/s OPAL and thus are exempt from service tax under Notification No. 09/2009-ST dated 03.03.2009 as amended by Notification No. 15/2009–ST dated 20.05.2009 and subsequent exemption Notification No. 17/2011-ST dated 01.03.2011 and 40/2012-ST dated 20.06.2012.
As per revenue, the service tax exemption is available to services received by a Developer or units of SEZ with approval from the approval committee. The revenue demanded Service tax along with interest and penalty. The proposed demand was confirmed with interest and an equal amount of penalty was imposed under Section 78 of the Finance Act, 1994.
Shri Nimesh S. Desai, counsel on behalf of the Appellant submitted that undisputedly appellant provided the disputed services in terms of the contract by the main contractors at the site of SEZ units (M/s OPAL and M/s Torrent Power). That usually, the services transaction takes place between two parties, i.e. Service provider and the Service receiver but in the present case there are three parties to the transaction. If a sub-contractor is providing services to the main contractor for completion of the main contract, then service tax is not leviable on the services provided by such sub-contractor.
A two-member bench comprising Ramesh Nair, member (judicial) and C L Mahar, Member (Technical) observed that “even though the sub-contractor provided the service as sub-contractor to the main contractor but it is not under dispute that the service was provided in the SEZ which prima-facie show that services were provided by the appellant as sub-contractor which was ultimately received by the SEZ developer or unit in SEZ.’
The CESTAT set aside the impugned order and allowed the appeal by way of remand to the Adjudicating Authority to pass a fresh order
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