The Customs, Excise & Service Tax Appellate Tribunal, Mumbai ruled that the SEZ Developer is not liable to pay Service Tax on services provided to units.
Facts
The appellant is registered with Service Tax. Therefore, the records of the appellant were subjected to audit by Revenue. During the course of audit, it was noticed by Revenue that the appellant was receiving some amounts towards lease rent and maintenance.
Therefore, the financial accounts of the appellant were further scrutinized by Revenue for the period from October 2007 to March 2012 and it was noticed that the appellant was receiving amounts for providing renting of immovable property and maintenance or repair services to various units which were categorized into three categories, viz. units which were not having SEZ status, units which did not have approved list of services and units availing services before the approval was accorded.
Submissions
Chartered Accountant submitted that the appellant is an SEZ developer and the Government of India through a Notification has accorded approval for development and operation of the sector specific special economic zone for information technology and information technology enabled services at Powai village in Mumbai and as a result, the appellant is an SEZ developer since 13.04.2007.
The Authorised Representative has submitted that sub-section (2) of Section 26 of said SEZ Act, 2005 provides that the provisions of sub-section (1) of Section 26 of said Act are applicable only when the conditions prescribed under said subsection (2) are complied with.
Decision
The division bench of Anil G. Shakkarwar Member (Technical) and Dr. Suvendu Kumar Pati Member (Judicial) noted that Notification exempts taxable services provided to a developer of SEZ or a unit of SEZ by any service provider.
It was further noted that the clause (e) of sub-section (1) of Section26 of SEZ Act, 2005 provides that every developer and the entrepreneur shall be entitled to the exemption from service tax under Chapter V of Finance Act, 1994 on taxable services provided to a developer or units to carry on authorized operations in a special economic zone.
The bench said that when the present appellant has provided services only to the units under SEZ, the said services were covered by the provisions of sub-section (1) of Section 26 of SEZ Act, 2005.
The tribunal held that the issue is covered by the provisions of sub-section (1) of Section 26. Therefore, Revenue does not have authority of law to collect service tax on services provided by SEZ developer to units in SEZ.
Case title: M/s. Hiranandani Builders v/s Commissioner of Service Tax-VII, Mumbai
Citation: Service Tax Appeal No. 86258 of 2016
Author of Tax Concept