Service Tax Demand on Cab Services to Wipro SEZ Unit Set Aside: CESTAT Quashes ₹20.23 Lakh Service Tax Demand [Read Order]

In a recent ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Hyderabad has quashed a service tax demand of ₹20.23 lakh against Nine Wheels Rent‑A‑Cab, holding that cab services provided to Wipro’s Special Economic Zone(SEZ) unit qualify for exemption under the SEZ Act.

The appellant, Nine Wheels Rent‑A‑Cab, appealed against the Commissioner (Appeals) order dated 31 July 2013, which had upheld a service tax demand of ₹20,23,419 along with interest under Section 75 of the Finance Act, 1994.

The dispute arose when the department alleged that cab services provided to Wipro Ltd, an SEZ unit, did not qualify for exemption under Notification No. 4/2004‑ST since pick‑up and drop facilities were not consumed within the SEZ area.

The appellant argued that Rent‑A‑Cab services are recognized as authorized SEZ services under official instructions, meaning they should be treated as “used within the SEZ” and exempt from service tax, and also included that Sections 26and 51 of the SEZ Act override conflicting provisions of the Finance Act, citing Supreme Court and High Court rulings (Eclerx Services and GMR Aerospace).

It was also argued that the show cause notice for 2008–09 was time‑barred since returns were regularly filed, SEZ certificates endorsed, and no fraud or intent to evade tax was present.

On the other hand department argued that it supported the adjudicating authority’s order, stressing that the exemption under the Notification applies only when services are consumed entirely within the SEZ.

After hearing both sides, the tribunal noted that while Rent‑A‑Cab services were not specifically listed as authorized SEZ services, the only objection was that they were not wholly used within the SEZ area as required by Notification No. 4/2004‑ST and Section 26(1)(e) of the SEZ Act expressly exempts service tax on services provided to SEZ units for authorized operations, and Section 51 gives the Act overriding effect over other laws.

The bench of Angad Prasad ( judicial member), A.K. Jyotishi( technical member ) cited the GMR Aerospace Engineering Ltd ruling to emphasize that Finance Act notifications cannot restrict SEZ exemptions. So the condition of within SEZ was not applicable, the demand was unsustainable, and the Commissioner’s order was set aside.

Accordingly the the appeal was allowed with consequential relief.

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