Relief to Shapoorji Pallonji: CESTAT rules Non-Filing of Forms A-1 & A-2 does not Invalidate SEZ Service Tax Exemption [Read Order]
CESTAT rules that the SEZ Act overrides the Finance Act, and tax exemption cannot be denied for failure to submit Forms A-1 and A-2
![Relief to Shapoorji Pallonji: CESTAT rules Non-Filing of Forms A-1 & A-2 does not Invalidate SEZ Service Tax Exemption [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/03/Service-Tax-Shapoorji-Pallonji-CESTAT-taxscan.jpg "Relief to Shapoorji Pallonji: CESTAT rules Non-Filing of Forms A-1 & A-2 does not Invalidate SEZ Service Tax Exemption [Read Order]")
The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled in favor of Shapoorji Pallonji & Company Limited, ruling that the failure to submit Forms A-1 & A-2 does not invalidate the SEZ service tax exemption under the Special Economic Zones ( SEZ ) Act, 2005. Shapoorji Pallonji & Company Limited, the appellant, engaged in providing...
The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled in favor of Shapoorji Pallonji & Company Limited, ruling that the failure to submit Forms A-1 & A-2 does not invalidate the SEZ service tax exemption under the Special Economic Zones ( SEZ ) Act, 2005.
Shapoorji Pallonji & Company Limited, the appellant, engaged in providing construction services to SEZ developers and units, availed service tax exemption under Section 26 of the SEZ Act, 2005, which provides tax benefits for services used in authorized SEZ operations.
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During an audit, the revenue authorities objected to the exemption, arguing that the company had failed to submit Forms A-1 & A-2, which are required under various service tax exemption notifications issued under the Finance Act, 1994.
A show cause notice (SCN) was issued, and the Principal Commissioner of Central Excise (PCIT) partially confirmed the demand for service tax along with interest and penalties. Aggrieved by this decision, the company filed an appeal before CESTAT.
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The appellant argued that the SEZ Act has overriding authority, as Section 51 of the Act states that its provisions prevail over any conflicting provisions in other laws, including the Finance Act, 1994. The company’s counsel argued that service tax exemption is granted directly under Section 26 of the SEZ Act, and there was no requirement to comply with conditions imposed by exemption notifications under the Finance Act.
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The appellant relied on several legal precedents, including GMR Aerospace Engineering Ltd. v. Union of India (AP High Court), Eclerx Services Ltd. v. Commissioner of CGST (Tri-Mumbai), and Cummins Turbo Technology v. CCE (Tri-Delhi), which held that denying SEZ exemptions due to procedural non-compliance contradicts the intent of the SEZ Act.
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The two-member bench, comprising S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member), ruled in favor of the appellant. The tribunal held that the SEZ Act provides a standalone exemption that cannot be restricted by procedural conditions under the Finance Act.
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The failure to submit Forms A-1 & A-2 was deemed a procedural lapse rather than a substantive non-compliance, and such minor deficiencies cannot override the statutory exemption granted under the SEZ Act. The tribunal set aside the service tax demand of Rs. 14.52 crores along with penalties and interest, ruling that Shapoorji Pallonji was entitled to SEZ service tax exemption despite not submitting Forms A-1 & A-2.
To Read the full text of the Order CLICK HERE
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