In the recent case, the Ahmedabad bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) set aside the time-barred demand for service tax on SEZ security services, granting the appellant relief from the service tax demand, interest, and penalty.
Dixit Investigation & Security Pvt Limited,the appellant-assessee, engaged in providing taxable services under the category of ‘Security Agency Services’ as per Section 65(105)(w) of the Finance Act, 1994, was audited for the years 2009-10 and 2011-12.
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During the audit, it was found that the appellant provided security services to M/s Larsen & Toubro Ltd. and claimed exemption under Rule-10 of the SEZ Rules, 2006, based on a certificate issued by the Development Commissioner’s Office. However, the exemption did not comply with the conditions laid down in Rule-10 of the SEZ Rules, making the appellant ineligible for exemption under Notification No. 9/2009-ST, as amended.
A Show Cause Notice dated 27.09.2013 was issued, and the Adjudicating Authority confirmed a service tax demand of Rs. 4,76,805/- along with interest of Rs. 1,29,818/-, both paid by the appellant on 22.04.2013. A penalty under Section 78 was also imposed.
The appellant’s appeal before the Commissioner (Appeals) was rejected on both merits and time-bar, with the latter based on procedural deficiencies, leading to the present appeal.
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The appellant argued that as a sub-contractor in the SEZ, procedural non-compliance should not disqualify them from the exemption. They relied on several case laws, including Randhawa Construction, Anjani Excavation Operation, and BT Patel & Co, to support their position. They further contended that they were a registered service provider, regularly declaring exempted values in their ST-3 returns, and there was no malafide intention to evade tax, making the demand unsustainable due to time-bar.
The tribunal noted that the case could be disposed of on time-bar grounds. Since the appellant had declared exempted services in their ST-3 returns for April to September 2010 and had a bonafide belief that services provided in the SEZ were exempt, there was no suppression of facts or malafide intent. Accordingly, the demand was found to be unsustainable.
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The two-member bench comprising Ramesh Nair (Judicial Member) and C L Mahar(Technical Member) set aside the impugned order and allowed the appeal with consequential relief.
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