Custom, Excise & Service Tax Tribunal
Hi Tech Refractory Company vs Haldia Commissionerate on 27 February, 2026
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.1
Excise Appeal No.77603 of 2018
(Arising out of Order-in-Appeal No.149/HAL/CE/2017-18 dated 05.03.2018 passed
by Commissioner (Appeals) of CGST & Central Excise, Kolkata)
M/s Hi-Tech Refractory Company
(Vill.-Dakshin Baguyan, Tamluk, Purba Medinipur, Pin-721653)
Appellant
VERSUS
Commissioner of CGST & Central Excise, Haldia
(15/1, Strand Road, Kolkata-700001)
Respondent
APPERANCE :
Mr.Sourabh Bagaria & Mr.Indranil Banerjee, both Advocates for the Appellant
Mr.S.K.Jha, Authorized Representative for the Respondent
CORAM:
HON'BLE MR.ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE MR.K.ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO.75311/2026
DATE OF HEARING : 25 FEBRUARY 2026
DATE OF PRONOUNCEMENT : 27 FEBRUARY 2026
Per Ashok Jindal :
The appellant is in appeal against the impugned order.
2. The facts of the case are that the appellant is registered with
Central Excise Department for providing erection, commissioning and
installation service and construction service other than residential
complex including commercial/industrial buildings or civil construction.
The appellant was providing construction service. It was found that the
appellant has providing this service by filing ST-3 Returns and availing
exemption benefit for providing the services to be received by SEZ unit
or a developer of SEZ under Notification No.40/2012-ST dated
20.06.2012, which superseded by Notification No.12/2013-ST dated
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01.07.2013 without observing the procedures and conditions as
stipulated and thereafter, charged an amount of Rs.53,55,600/- for
providing the exempted service to their client leading to non-payment
of service tax of Rs.6,42,672/-.
2.1 On scrutiny of the ST-3 Returns for the period October, 2013 to
March, 2014, it was found that the appellant being a provider of
Construction Services other than residential complex including
commercial/industrial buildings or civil structures have shown an
amount of Rs.53,55,600/- charged for providing exempted service in
addition to furnishing gross amount/gross total amount of
Rs.59,45,600/-. It was also found that the appellant has mentioned
against an option column for availing the benefit of exemption in
the said ST-3 Returns to the effect of providing exempted service
under Notification No.40/2012-ST dated 20.06.2012, which shows thast
the service tax with cess has been assessed and paid on the Net
Taxable Value derived after deducting the amount of exempted
service i.e. Rs.53,55,600/- from the gross taxable amount i.e.
Rs.59,45,600/-.
2.2 Notification No.40/2012-ST dated 20.06.2012 as superseded by
Notification No.12/2013-ST dated 01.07.2013, has exempted the
services on which the service tax is leviable under Section 66B of the
said Act, received by a unit located in a SEZ or developer of SEZ and
used for the authorized operation from the whole of the service tax,
education cess and secondary and higher secondary cess leviable
thereon.
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2.3 The exemption shall be provided by way of refund of service tax
paid on the specified services received by the SEZ unit or the developer
and used for the authorized operations.
2.4 The appellant was requested by a letter dated 28.09.2015 for
submission of authorization in Form A-2 on the strength of which, the
appellant may deserve the right/eligibility to avail the exemption from
payment of whole of the service tax with cess for providing the said
service for which an amount of Rs.53,55,600/- has been charged to
their client and no service tax has been paid. The appellant did not
provide Form A-2. Therefore, the impugned show-cause notice dated
09.10.2015 was issued to the appellant for the period October, 2013 to
March, 2014.
2.5 The matter was adjudicated. The demand of service tax was
confirmed by denying the said Notification.
2.6 Being aggrieved with the said order, the appellant is before us.
3. The ld.Counsel for the appellant submits that the facts in the
case are not in dispute. He submits that the appellant is providing
services to SEZ Unit and Form A-1 in terms of Notification No.12/2013-
ST dated 01.07.2013, has been produced by the appellant and Form A-
2 is only procedural lapse for which, the benefit of Notification cannot
denied to the appellant. To support his contention, he relies on the
following decisions :
(i) Shapoorji Pallonji & Company Ltd. Vs. Commissioner of
Central Excise, Customs & Service Tax, Nagpur I vide Final Order
No.A/85265/2025 dated 25.02.2025 passed by this Tribunal ;
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Excise Appeal No.77603 of 2018
(ii) Sai Wardha Power Company Ltd. Vs. Union of India : 2015
(39) STR 952 (Bom.).
4. The ld.A.R. for the Revenue has justified the impugned order.
5. Heard both the parties and considered the submissions.
6. We find that the issue has been dealt by this Tribunal in the
case of Shapoorji Pallonji & Company Ltd. (supra), wherein this Tribunal
has observed as under :
"9.1 We find that the dispute in respect of similar issue relating
to exemption from payment of service tax in respect of services
provided to SEZ have been dealt with in the case of GMR
Aerospace Engineering Limited (supra) by the Hon'ble Andhra
Pradesh High Court by holding that standalone exemptions under
Section SEZ law are not subject to provisions of any other law,
including Finance Act, 1994, and therefore such exemption cannot
be denied for mere non-filing forms, as these are not required
under SEZ law. The relevant paragraphs of order of the Hon'ble
High Court in the above case is extracted and given below:
"16. That takes us to the main contention revolving around the
SEZ Act, 2005, SEZ Rules, 2006, Finance Act 1994 and the
notifications issued by the Government. Before looking at the
interplay of all these, it may be useful to first take note of the
scheme of the Act. The broad scheme and the features of the SEZ
Act, 2005 was taken note of by a Division Bench of the Madras
High Court to which one of us (VRS)) was a party, in Nokia India
Sales Pvt. Ltd. v. the Assistant Commissioner (CT),
Sriperumbudur Assessment Circle, Chennai 2017 (101) VSP 361
(Mad)......
18. In the light of the above admitted facts, the only question that
arises for consideration is as to whether the availability of
exemptions under Section 26 of the SEZ Act would depend not
only upon the terms and conditions prescribed under Section
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26(2), but also upon the terms and conditions prescribed in the
notifications issued under various enactments such as Customs
Act, 1962, Customs Tariff Act, 1975, Central Excise Act, 1944,
Central Excise Tariff Act, 1985, Finance Act, 1994 and Central
Sales Tax Act, 1956 etc., enlisted in clauses (a) to (g) of sub-
section (1) of Section 26 of the Act.
20. In order to find an answer to this question, one must
understand in conceptual terms, what a Special Economic Zone is.
As pointed out by the Madras High Court in Nokia India Sales, a
SEZ (1) is a territory outside the Customs Territory of India for
the purpose of undertaking authorized operations and (2) is
deemed to be a port, in land container depot, land stations and
land customs station under Section 7 of the Customs Act, 1962.
This is by virtue of Section 53 of SEZ Act, 2005. Keeping this core
concept in mind, let us now go to the provisions of the Act.
Section 7 of the Act exempts from payment of taxes, duties or
cess, under all enactments specified in the First Schedule, any
goods or services exported out of or imported into or procured
from Domestic Tariff Area, by a unit in a SEZ or a developer. But
Finance Act, 1994 is not one of the enactments specified in the
First Schedule. Therefore, Section 7 has no application to the case
on hand.
21. However, Section 26(1) specifically allows exemptions,
drawbacks and concessions to every developer and entrepreneur.
These exemptions are confined to the enactments listed in clauses
(a), (b), (c), (e), (f) and (g). Section 26 in its entirety reads as
follows :.....
22. It may be noted that sub-section (1) of Section 26 begins with
the words "subject to the provisions of sub-section (2)". Sub-
section (2) authorizes the Central Government to prescribe the
manner in which and the terms and conditions subject to which
exemptions shall be granted to the Developer or entrepreneur
under sub-section (1).
23. As rightly pointed out by Sri S. Niranjan Reddy, Learned
Senior Counsel appearing for the petitioner, the word "prescribe"
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Excise Appeal No.77603 of 2018
appearing in sub-section (2) of Section 26 has to be understood
with reference to the definition of the word "prescribed" appearing
in Section 2(w) of the SEZ Act, 2005. Section 2(w) of the Act
reads as follows:
"prescribed" means prescribed by rules made by the Central
Government under this Act."
24. Therefore, the terms and conditions subject to which the
exemptions are to be granted under sub-section (1) of Section 26
should be prescribed by the Rules made by the Central
Government under the SEZ Act, 2005. Being conscious of this
fact, the executive has incorporated Rule 22 in the SEZ Rules,
2006 issued in exercise of the power conferred by Section 55 of
the SEZ Act. It is not necessary to extract Rule 22, since there is
no dispute about the fact (1) that the petitioners have complied
with the prescriptions contained in Rule 22 of the SEZ Rules, 2006
and (2) that Rule 22 of the SEZ Rules, 2006 does not stipulate the
filing of forms A1 and A2 as prescribed in the three notifications
issued under Section 93 of the Finance Act, 1994.
25. In other words, the 5th respondent does not dispute the fact
that the petitioners have fulfilled the terms and conditions
stipulated in Rule 22 of the SEZ Rules, 2006 and that if those
Rules are considered on a stand alone basis, the petitioners would
be entitled to the exemptions.
26. Having taken note of the provisions of the SEZ Act and Rules,
let us have a look at the Finance Act and the relevant
notifications. Section 93 of the Finance Act, 1994 reads as follows
:.....
28. The SEZ Act, 2005 is also a parliamentary enactment issued
later in point of time to the Finance Act, 1994 and Section 51 of
the Act declares that the provisions of the SEZ Act, 2005 shall
have effect notwithstanding anything inconsistent therewith
contained in any other law for the time being in force or in any
instrument having effect by virtue of any law other than this Act.
Section 51 reads as follows:
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Excise Appeal No.77603 of 2018
"51. Act to have overriding effect. The provisions of this Act shall
have effect notwithstanding anything inconsistent therewith
contained in any other law for the time being in force or in any
instrument having effect by virtue of any law other than this Act."
29. The contention of Smt. Sundari R. Pisupati, Learned Senior
Standing Counsel is that there is no inconsistency between (1) the
terms and conditions prescribed in the notifications issued under
Section 93 of the Finance Act, 1994 and (ii) the terms and
conditions prescribed in Rules 22 and 31 of the SEZ Rules, 2006,
and that therefore, Section 51 of the SEZ Act, 2005 cannot be
pressed into service. But this contention is unacceptable.
30. This is for the reason that Section 26(1) of the SEZ Act made
the entitlement to certain exemptions subject to provisions of
sub-section (2) of Section 26. Section 26(1) did not make the
entitlement of a Developer to certain exemptions, subject to the
provisions of something else other than the provisions of sub-
section (2). Therefore, the 5th respondent cannot read Section
26(1) to mean that the exemptions listed therein are (1) subject
to the provisions of sub-section (2) of Section 26, and (2) also
subject to the terms and conditions prescribed in the Customs
Act, 1962, the Customs Tariff Act, 1975, the Central Excise Act,
1944, the Central Tariff Act, 1985 and the Finance Act, 1994. This
is especially so, since the authority of the Central Government to
prescribe the terms and conditions subject to which exemptions
may be granted under Section 26(1), flows only out of sub-
section (2) of Section 26. The word "prescribe" is verb. Generally
no enactment defines the But the SEZ Act 2005 defines the word
"prescribe". word "prescribe" under Section 2(w) to mean the
rules framed by the Central Government under the SEZ Act,
2005. The space is also not left unoccupied, as the Central
Government has issued a set of Rules known as "the Special
Economic Zones Rules, 2006", wherein the Central Government
has prescribed the terms and conditions for grant of exemptions
under Rule 22. Therefore, there is no question of comparing the
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terms and conditions prescribed in Rule 22 with the terms and
conditions prescribed in the notifications issued under any one of
five enactments listed in Section 26(1) to find out whether there
was any Inconsistency.
31. Support can be drawn for the above interpretation, from
Section 50 of the SEZ Act, 2005 also. Section 50 of the SEZ Act,
2005 enables State Governments to enact laws for the grant of
exemption from state taxes, levies and duties. Since a Central
Law cannot provide for exemption from the levy of State taxes,
Section 50 merely enables the State Governments to enact laws.
32. A combined reading of Sections 7, 26 and 50 of the SEZ Act,
2005, would show that SEZ Act, 2005 speaks of three different
types of exemptions. They are,
(1) exemption from payment of taxes under the enactments
specified in the First Schedule, in respect of goods and services
exported out of, or imported into or procured from a DTA by a
unit in a Special Economic Zone or a Developer under Section 7,
(2) exemption from payment of duties under the Customs Act,
1962, Customs Tariff Act, 1975, Central Excise Act, 1994, Central
Excise Tariff Act, 1985, Finance Act, 1994, Finance (No. 2) Act,
2004 and Central Sales Tax Act, 1956, covered by Section 26 (1);
and
(3) exemption from payment of state taxes, levies and duties
covered by Section 50, provided there is a state enactment to the
said effect.
33. The word "prescribe" is used in the present tense in Section
26(2) and in the past tense in Section 7. Both will have the same
meaning as assigned to the word under Section 2(w). The
moment a set of rules is issued either in respect of matters
covered by Section 7 or in respect of matters covered by Section
26(1), there is no scope for invoking any other law for imposing
any other condition.
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34. The benefit of exemptions granted under the notifications
issued under Section 93 of the Finance Act, 1994, are available to
any one and not necessarily confined to a unit in a special
economic zone. Section 93 of the Finance Act, in that sense is a
general power of exemption available in respect of all taxable
services. But, Section 26(1) is a special power of exemption under
a special enactment dealing with a unit in a special economic
zone. Therefore, the notifications issued under Section 93 of the
Finance Act, 1994 cannot be pressed into service for finding out
whether a unit in a SEZ qualifies for exemption or not.....
42. But, we do not agree. Though the "section title" to Section 26
reads as "exemptions, drawbacks and concessions", clauses (a) to
(g) except clause (d) speak only about exemptions. It is only
clause (d) of sub-section (1) of Section 26, which speaks about
drawbacks and such other benefits. In so far as exemption is
concerned, sub-section (1) makes the entitlement of a Developer
to exemption, subject only to the provisions of sub-section (2) of
Section 26. Sub-section (2) of Section 26 empowers the Central
Government to prescribe both the manner in which as well as the
conditions subject to which exemptions may be granted.
Therefore, the area relating to exemption is completely occupied
by the rules.
43. It is only the issues relating to refund, demand, adjudication,
review and appeal, which were left unoccupied by the SEZ Act and
the Rules framed thereunder. Realising the vacuum in respect of
these specific areas, sub-rule (5) was inserted under Rule 47.
Sub-rule (5) of Rule 47 makes a reference to the provisions of the
three enactments namely Customs Act, 1962, Central Excise Act,
1944 and Finance Act, 1994 and the Rules made thereunder and
the notifications issued thereunder. It is by virtue of this sub-rule
(5) that the authorities can fall back upon the Rules and
notifications issued under those three enactments. The very fact
that sub-rule (5) was inserted would show, that but for its
insertion, the respondents cannot fall back upon the Rules framed
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Excise Appeal No.77603 of 2018
under the Customs Act etc., for dealing with a question of refund,
demand, adjudication etc.
44. The issue can be looked at from another angle also. If sub-
rule (5) of Rule 47 had also included the procedure for grant of
exemption within its purview, then the stand taken by the
Department would be perfectly valid. The very fact that sub-rule
(5) of Rule 47 made the Rules and notifications issued under
certain Acts applicable only to issues of refund, demand etc.,
would show that Rules 22 and 31 have independent legs to stand.
45. Therefore, the writ petition is allowed, the Order-in-Original
dated 20-2-2018 is set aside and the notifications in question in
so far as they relate to Special Economic Zones, are set aside.
There shall be no order as to costs."
9.2 We further find that in the Special Leave Petition filed against
the above order of the Hon'ble High Court by the department in
SLP (Civil) Diary No.22140/2019, the Hon'ble Supreme Court had
dismissed the SLP filed by the department, by upholding the order
of the Hon'ble High Court. The extract of the said judgement
dated 28.07.2019 is given below:
ITEM NO.18
COURT NO.10
SECTION XII-A
SUPREME COURT OF INDIA RECORD OF PROCEEDINGS
SPECIAL LEAVE PETITION (CIVIL)
Diary No(s).22148/2019
(Arising out of impugned final judgment and order dated 27-12-
2018 in WP No. 13546/2018 passed by the High Court of
Judicature at Hyderabad for the State of Telangana and the State
of Andhra Pradesh)
UNION OF INDIA & ANR.
VERSUS
Petitioner(s)
M/S GMR AEROSPACE ENGINEERING LIMITED & ORS.
Respondent(s)
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Excise Appeal No.77603 of 2018
(WITH I.R. and IA No.105573/2019-CONDONATION OF DELAY IN
FILING and IA No. 105575/2019-EXEMPTION FROM FILING C/C
OF THE IMPUGNED JUDGMENT)
Date: 26-07-2010 This petition was called on for hearing today.
CORAM:
HON'BLE DR. JUSTICE D.Y. CHANDRACHUD HON'BLE MR. JUSTICE
ANIRUDDHA BOSE
For Petitioner(s)
Ms. Pinky Anand, ASG
Mr. Arijit Prasad, Sr. Adv.
Mr. Vikrant Yadav, Adv.
Mr. Abhishek Kumar, Adv.
Ms. Tanisha Samanta, Adv.
Mr. B. Krishna Prasad, AOR
For Respondent(s)
UPON hearing the counsel the Court made the following ORDER
Delay condoned.
In the facts and circumstances of the present case, we see no
reason to interfere with the impugned judgment and order of the
High Court.
The Special Leave Petition is accordingly dismissed.
Pending applications, if any, are disposed of.
(SANJAY KUMAR-I) AR-CUM-PS
(SAROJ KUMARI GAUR) COURT MASTER
In view of the detailed analysis and categorical decision of the
Hon'ble High Court of Andhra Pradesh which was upheld by the
Hon'ble Supreme Court, the issues under dispute in the present
case is no more open to debate, and a different view cannot be
taken by this Tribunal.
9.3. We also note that the Hon'ble Supreme Court had dealt with
the issue of "What is the interpretative rule to be applied while
interpreting a tax exemption provision/notification when there is
an ambiguity as to its applicability with reference to the
entitlement of the assessee or the rate of tax to be applied?" in
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the case of Dilip Kumar and Company (supra). We find that in the
present case, the question of ambiguity in Interpretation are not
the issue to be dealt, and therefore we do not find force in the
argument of learned AR, that the same should apply to the
present case.
10. We also find that the Co-ordinate Bench of the Tribunal in the
case of Cummins Turbo Technology (supra) have held that there
is no legal authority to levy and collect central excise duty,
customs duty or service tax for goods or services supplied for
authorised operations of SEZ developers and units covered by
Section 26 of the SEZ Act, 2005. Without such legal authority, no
tax or duty can be either levied or collected in view of Article 265
of Constitution of India, 1950. Therefore, the Tribunal have held
that there is no need for exemption notifications under Central
Excise Act, 1944, Customs Act, 1962 and Finance Act, 1994, nor
is it necessary to fulfil of conditions under exemption notifications,
if any, issued. The relevant paragraph of the said order is
extracted and given below:
"23. While the SEZ Act itself provided for exemption from service
tax (as well as Central Excise duty and Customs duty), exemption
notifications were also issued by the Government under the
respective laws. These exemption notifications were also issued
with some conditions. Thus, there is duplication inasmuch as the
goods and services provided to authorised operations of
developers and units in the SEZs are exempted from Customs
duty, Central Excise duty and the service tax by the SEZ Act itself
(subject to the manner which may be prescribed) and there are
also exemption notifications under the respective tax laws which
are also subject to some conditions. The exemption notification in
dispute in this case is service tax exemption notification ST-
40/2012 dated 20-6-2013.
24. This contradiction and duplication of exemption under the two
provisions viz. SEZ Act and Rules and the exemption notifications
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under the Finance Act, 1994 were discussed at length by this
bench in case of DLF Assets 2021 (45) G.S.T.L. 176 (Tribunal),
the relevant extract of which is reproduced below:
"10. According to the appellant, as the aforesaid services were
utilized for authorized operations by the recipient SEZ units, there
was no necessity to pay any service tax. The Department,
however, alleged that though the exemption. provided under the
SEZ Act is contained in the Notification dated March 3, 2009, but
the appellant did not follow the conditions prescribed therein and,
therefore, was liable to pay service tax on renting of immovable
property services to SEZ units. The Department also alleged that
since the appellant had classified signage as sale of space or time
for advertisement, it was not entitled to claim exemption.
11. In order to appreciate the contentions advanced by learned
Counsel for the appellant and the learned Authorized
Representative of the Department, it will be appropriate to refer
to the relevant provisions. Section 26 of the SEZ Act deals with
exemptions, drawbacks and concessions to every Developer and
entrepreneur. The relevant provisions are reproduced below:
"26. Exemptions, drawbacks and concessions to every Developer
and entrepreneur.-
(1) Subject to the provisions of sub-section (2), every Developer
and the entrepreneur shall be entitled to the following
exemptions, drawbacks and concessions, namely:-
(a) To (d) **
(e) exemption from service tax under Chapter V of the Finance
Act, 1994 (32 of 1994) on taxable services provided to a
Developer or Unit to carry on the authorized operations in a
Special Economic Zone;
(f) to (g) **
(2) The Central Government may prescribe the manner in which,
and the terms and conditions subject to which, the exemptions,
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concessions, drawback or other benefits shall be granted to the
Developer or entrepreneur under sub-section (1)."
12. Section 51 of the SEZ Act further provides overriding effect to
the provisions of the SEZ Act and it is reproduced below:
"51. Act to have overriding effect The provisions of this Act shall
have effect notwithstanding anything Inconsistent therewith
contained in any other law for the time being in force or in any
instrument having effect by virtue of any law other than this
Act."....
25. Thus, the legal position is that SEZ Act overrides any other
law because of section 51 of the SEZ Act. The question is what
part of the tax law have been overridden by the SEZ Act. To
answer this question, we proceed to examine the requirement
under the Constitution of India to levy taxes and the relevant
legal provisions of the Central Excise Act and Customs Act and
Chapter V of the Finance Act, 1994 under which Service Tax is
levied.
26. Taxes can be levied only as per article 265 of the Constitution
of India which reads as follows:
265. Taxes not to be imposed save by authority of law. No tax
shall be levied or collected except by authority of law.
27. This authority of law to levy and collect taxes is in the form of
charging sections of the Acts- such as section 3 of the Central
Excise Act, 1944, section 12 of the Customs Act, 1962 and
sections 66, 66A and section 66B of Chapter V of the Finance Act,
1994 (for collection of Service Tax). While section 66 provides for
levy of service tax on forward charge basis by the service
provider, section 66A provides for charge of service on reverse
charge basis by the service recipient in case of certain services.
Section 66B provides for levy of service tax on all services other
than those in the negative list after 2012.
28. The levy and collection of these taxes and duties are further
modified by some machinery provisions of these Acts, including
those which enable the Government to issue exemption
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notifications. The contradiction is between these three charging
sections under which duties or service tax are levied and section
26 of the SEZ Act as per which they are exempted. Section 51 of
the SEZ Act overrides the provisions of the other Acts and
therefore, service tax is always exempted for the services
provided to developers and units in SEZ regardless of any
provisions of the Finance Act, 1994. Section 26 of the SEZ Act
reads as follows:
26. (1) Subject to the provisions of sub-section (2), every
Developer and the entrepreneur shall be entitled to the following
exemptions, drawbacks and concessions, namely: -
(a) exemption from any duty of customs, under the Customs Act,
1962 or the Custom Tariff Act, 1975 or any other law for the time
being in force, on goods imported into, or service provided in, a
Special Economic Zone or a Unit, to carry on the authorised
operations by the Developer or entrepreneur;
(b) exemption from any duty of customs, under the Customs Act,
1962 or the Customs Tariff Act, 1975 or any other law for the
time being in force, on goods exported from, or services provided,
from a Special Economic Zone or from a Unit, to any place outside
India;
(c) exemption from any duty of excise, under the Central Excise
Act, 1944 or the Central Excise Tariff Act, 1985 or any other law
for the time being in force, on goods brought from Domestic Tariff
Area to a Special Economic Zone or Unit, to carry on the
authorised operations by the Developer or entrepreneur
(e) exemption from service tax under Chapter-V of the Finance
Act, 1994 on taxable services provided to a Developer or Unit to
carry on the authorised operations in a Special Economic Zone;
29. Section 51 of the SEZ Act states that the provisions of SEZ
Act override any other provisions of other laws. It reads as
follows:
51. (1) The provisions of this Act shall have effect notwithstanding
anything inconsistent therewith contained in any other law for the
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Excise Appeal No.77603 of 2018
time being in force or in any instrument having effect by virtue of
any law other than this Act.
30. Thus, insofar as supplies for authorised operations of SEZ
developers and units are concerned, section 26 of the SEZ Act
overrides the charging sections in all the three Acts.
31. The charging sections, having been overridden by the SEZ
Act, no legal authority to levy and collect central excise duty,
customs duty or service tax for goods or services supplied for
authorised operations of SEZ developers and units covered by
section 26 remains. Without such a legal authority, no tax or duty
can be either levied or collected in view of article 265 of the
Constitution of India.
32. Therefore, there is no need for any exemption notifications
under any of these three Acts, nor is it necessary to fulfil any of
the conditions laid down in the exemption notifications, if any,
issued for the purpose. Thus, the charge of excise duty under
section 3 of the Central Excise Act, the charge of customs duty
under section 12 of the Customs Act and the charge of service tax
under sections 66, 66A and 668 of the Finance Act, 1994 will not
apply to goods and services supplied to developers and units for
authorized operations in the SEZ areas by virtue of the overriding
provisions of the SEZ Act. Any exemption notifications and
conditions therein are therefore, redundant because, the
Parliament itself has, through the SEZ Act, overridden the charge
in the other laws.
33. The status of exemption notifications which are issued when
the tax that is sought to be levied is out of the ambit of charging
section itself was considered by the Supreme Court in the case of
Larsen & Toubro.
The case before the Supreme Court, in brief, was as follows.
Service tax was levied under Chapter V of the Finance Act, 1994
under section 66 on taxable services. The list of taxable services
was defined under section 65(105) and this list was expanded
from time to time. If the taxable service was provided as a part of
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a works contract which involved both rendering the service and
transfer or deemed transfer of goods, exemption notifications
were issued by the Government towards abatement of the value
of the goods used in the services. Later, on 1-6-2007, works
contract service, itself was introduced as a service. The question
before the Supreme Court was whether works contract service
could have been taxed under various other heads prior to this
date. The Supreme Court held that there was no charge on works
contract service prior to 1-6-2007 because works contracts
services were a separate specie of contract known to commerce
and there was no levy on such contracts prior to 1-6-2007. It was
pleaded on behalf of the Revenue that abatements were given
through various exemption notifications prior to 1-6-2007. The
Supreme Court held as follows:
43. We need only state that in view of our finding that the said
Finance Act lays down no charge or machinery to levy and assess
service tax on indivisible composite works contracts, such
argument must fail. This is also for the simple reason that there is
no subterfuge in entering into composite works contracts
containing elements both of transfer of property In goods as well
as labour and services.
44. We have been informed by counsel for the revenue that
several exemption notifications have been granted qua service tax
"levied" by the 1994 Finance Act. We may only state that
whichever judgments which are in appeal before us and have
referred to and dealt with such notifications will have to be
disregarded. Since the levy itself of service tax has been found to
be non-existent, no question of any exemption would arise. With
these observations, these appeals are disposed of.
34. In view of the aforesaid legal position, the exemption
notifications issued under the Finance Act, 1994 are redundant
because service tax was already exempted by the Parliament by
section 26 of the SEZ Act. Any conditions in such notifications are
also, therefore, irrelevant and need not be fulfilled. Any amount
paid as representing service tax either in the services provided
18
Excise Appeal No.77603 of 2018
directly to the SEZ units under invoices issued by the service
providers or indirectly through the ISD Invoices issued by the
input service distributor are merely deposits and need to be
refunded. They are like the amount deposited during
investigations or before succeeding in appeals against demands or
fine or penalty which are subsequently set aside. The question is,
therefore, answered in favour of the appellant and the appellant is
eligible to refund of service tax."
11.1 We also find that the Tribunal in the case of Eclerx Services
Ltd.(supra) have held that SEZ unit was eligible for exemption
from service tax on services received by it and in view of the
overriding effect of SEZ law, denial of exemption on the grounds
of procedural infirmities is not sustainable. The relevant
paragraphs of the said order is extracted and given below:
"6. The issue to be decided on this appeal is plain and simple
enough: whether the notifications relied upon by the adjudicating
authority can invalidate exemption accorded under
'26. (1) Subject to the provisions of sub-section (2), every
Developer and the entrepreneur shall be entitled to the following
exemptions, drawbacks and concessions, namely: -
(a) exemption from any duty of customs, under the Customs Act,
1962 or the Custom Tariff Act, 1975 or any other law for the time
being in force, on goods imported into, or service provided in, a
Special Economic Zone or a Unit, to carry on the authorised
operations by the Developer or entrepreneur;
(b) exemption from any duty of customs, under the Customs Act,
1962 or the Customs Tariff Act, 1975 or any other law for the
time being in force, on goods exported from, or services provided,
from a Special Economic Zone or from a Unit, to any place outside
India;
(c) exemption from any duty of excise, under the Central Excise
Act, 1944 or the Central Excise Tariff Act, 1985 or any other law
for the time being in force, on goods brought from Domestic Tariff
19
Excise Appeal No.77603 of 2018
Area to a Special Economic Zone or Unit, to carry on the
authorised operations by the Developer or entrepreneur;
(d) drawback or such other benefits as may be admissible from
time to time on goods brought or services provided from the
Domestic Tariff Area into a Special Economic Zone or Unit or
services provided in a Special Economic Zone or Unit by the
service providers located outside India to carry on the authorised
operations by the Developer or entrepreneur;
(e) exemption from service tax under Chapter-V of the Finance
Act, 1994 on taxable services provided to a Developer or Unit to
carry on the authorised operations in a Special Economic Zone;
(f) exemption from the securities transaction tax leviable under
section 98 of the Finance (No. 2) Act, 2004 in case the taxable
securities transactions are entered into by a non-resident through
the International Financial Services Centre;
(g) exemption from the levy of taxes on the sale or purchase of
goods other than newspapers under the Central Sales Tax Act,
1956 if such goods are meant to carry on the authorised
operations by the Developer or entrepreneur.
(2) The Central Government may prescribe the manner in which,
and the terms and conditions subject to which, the exemptions,
concessions, drawback or other benefits shall be granted to the
Developer or entrepreneur under sub-section (1).
of Special Economic Zones Act, 2005. It is unquestionably clear
from the '51. (1) The provisions of this Act shall have effect
notwithstanding anything Inconsistent therewith contained in any
other law for the time being in force or in any instrument having
effect by virtue of any law. other than this Act.'
of Special Economic Zones Act, 2005 that no other law can prevail
over it.
7. It is on record that the required documentation was not
available for the entire period of the dispute but, at the same
time, it cannot be denied that at some point, the eligibility did
exist. The procedural infirmities, for a shorter or longer time, does
20
Excise Appeal No.77603 of 2018
not in any way supplant the exemption accorded to the impugned
supply of services. Furthermore, the findings of the adjudicating
authority do not arrive at a conclusion that, but for the said
procedural infirmities, the eligibility of the appellant to render
such services without payment of tax was in question. In the light
of decision cited supra, the overriding nature of the exemption
afforded by section 26 of Special Economic Zones Act, 2005 and
the breach of conditions being procedural, we have no hesitation
in setting aside the demand pertaining to the rendering of
services to M/s Credit Suisse Service (India) Pvt. Ltd. 8. The next
issue concerns the finding that the services had been rendered in
India and consumed in India. The definition of (m) "export"
means -
(i) taking goods, or providing services, out of India, from a
Special Economic Zone, by land, sea or air or by any other mode,
whether physical or otherwise; or
(ii) supplying goods, or providing services, from the Domestic
Tariff Area to a Unit or Developer; or
(iii) supplying goods, or providing services, from one Unit to
another Unit or Developer, in the same or different Special
Economic Zone:'
In Special Economic Zones Act, 2005 is substantially different
from that in the rules which delineate 'exports' from 'domestic
supply' in the scheme of service tax law and, in view of section 51
of Special Economic Zones Act, 2005, have to be read in the
context of the exemption afforded by section 26 of Special
Economic Zones Act, 2005 and not in terms of Finance Act, 1994.
Consequently the prism through which the adjudicatory
perception has been enunciated does not apply to the facts of the
service rendered by the appellant. Accordingly, the demand for
allegedly rendering of services within India does not sustain."
11.2 We further find that in the Civil Appeal filed by the
department against the aforesaid order of the Tribunal holding
that exemption provided under Section 26 of the SEZ Act, 2005
has over riding effect and that the breach of conditions is
21
Excise Appeal No.77603 of 2018
procedural, the Hon'ble Supreme Court had dismissed the appeal
filed by the department, by upholding the order of the Tribunal.
The copy of the said judgement of the Hon'ble Supreme Court is
extracted and given below:
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE
JURISDICTION
CIVIL APPEAL NO. 549 OF 2023 Dy. No. 42620 of 2022
THE COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX
NAVI MUMBAI
Appellant(s)
ECLERX SERVICES LIMITED
Vs.
Respondent(s)
ORDER
Delay condoned.
The judgment Engineering Limited & Ors. decided 13546 of 2018) on upon in GMR Aerospace (W.P. No. Court of relied "M/Va Union of India & Anr." 27.12.2018 by the High Judicatura at Hyderabad for the state of Telangana and the state of Andhra Pradesh was challenged under Article 136 (in a SLP (C) Dy. No. 22140 of 2019) which was dismissed by this Court on 26.07.2019. Following the said decision, this Court holds that there is no merit in the appeal. It is accordingly dismissed.
All pending applications are disposed of. (S. RAVINDRA BHAT) J. (C.T. RAVIKUMAR) J Delhi: January 27, 2023.
12. In view of the foregoing discussions and analysis, and on the basis of the judgements delivered by the Hon'ble Supreme Court referred above, we are of the considered view that exemption benefits extended to taxable services provided to SEZ under Section 26 of the Special Economic Zones Act, 2005 cannot be 22 Excise Appeal No.77603 of 2018 denied on the ground that certain procedures have not been followed or certain conditions prescribed in the notification have not been fulfilled.
13. Therefore, the impugned order is liable to be set aside to the extent it had confirmed the adjudged demands proposed in the SCNs. Accordingly, by setting aside the impugned order dated 29.03.2016, the appeal filed by the appellants is allowed in their favour."
7. We further take note of the fact that this Tribunal in the case of M/s M.K.Enterprises Vs. Commissioner of Central Excise, Audit Commissionerate, Kolkata vide Final Order No.75380/2025 dated 18.02.2025, has observed as under :
"3.2. In respect of the demand of Service Tax confirmed under the category of 'erection, commissioning and installation service', it is the submission of the appellant that they have provided the said services as a sub-contractor of M/s. Alstom India Ltd., who were engaged by M/s. Vedanta Aluminium situated in an SEZ, Jharsuguda. The appellant submits that they have rendered the said services within the SEZ area, which are exempted from payment of service tax; however, the Id. adjudicating authority has chosen to deny the exemption on the ground that the exemption is available only to the main contractor who were engaged for providing service in the SEZ area; the said exemption is not available to sub-contractors who provide services to the main contractor. The appellant submits that they have rendered the service of 'erection, commissioning and installation' within the SEZ and hence they are eligible for the exemption and hence no service tax is payable by them for the services rendered within the SEZ area."23
Excise Appeal No.77603 of 2018
8. Further, in the case of Sai Wardha Power Company Ltd. (supra), the Hon'ble Bombay High Court has stated the facts, which are as under:
"3. Few facts giving rise to the petition are stated thus -
The petitioner is a power generating unit in the Special Economic Zone (hereinafter referred to as "SEZ" for the sake of brevity) in Warora. The unit of the petitioner is governed by the provisions of the Special Economic Zones Act, 2005 (hereinafter referred to as "the Act of 2005"). By a Notification issued by the Government of India, Ministry of Finance in the year 2009, all SEZ units were exempted from payment of Service Tax utilized for the authorized operations of the SEZ units. Under the Notification of the year 2009, an SEZ unit was required to pay the Service Tax initially and then seek its refund by claiming exemption. A notification was issued by the Government, bearing Notification No. 17 of 2011 providing for an option to the SEZ units not to pay the Service Tax ab initio. Certain conditions were required to be complied while availing ab initio exemption from payment of Service Tax. Under Clause 2 of Notification No. 12 of 2013, the SEZ unit was required to get the list of taxable services for the authorized operations of the SEZ unit, approved by the „Approval Committee‟, a statutory body constituted under the provisions of Section 13 of the Act of 2005. The SEZ unit was required to furnish a declaration in Form A-1, verified by the Specified Officer of the SEZ along with the list of specified services. As per Notification No. 12 of 2013, on the basis of the declaration made in Form A-1, an authorization was liable to be issued by the Jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, to the SEZ unit in Form A-2. The SEZ unit was required to furnish to the Jurisdictional Superintendent of Central Excise a quarterly statement, in Form A-3 furnishing the details of specified services 24 Excise Appeal No.77603 of 2018 received by it without payment of Service Tax. The notification further enjoined a duty on the SEZ unit to furnish an undertaking, in Form A-1 that in case the specified services on which the exemption had been claimed, were not exclusively used for the authorized operations or were not found to have been used exclusively for authorized operations, it would pay to the Government an amount that is claimed by way of exemption from Service Tax along with interest on delayed payment of Service Tax."
and in the said case, the Hon'ble Bombay High Court has observed as under :
"7. On hearing the learned counsel for the parties and on a perusal of the concerned notifications, it appears that the respondent No. 2 was not justified in refusing authorization to the petitioner, in Form A-2 for availing ab initio exemption from payment of Service Tax. On a perusal of the notifications, it is clear that the petitioner had an option to either pay the Service Tax in advance or not to pay the same, subject to the conditions provided in the notifications. For seeking ab initio exemption, the petitioner-unit was required to secure the approval of the list of services, as are required for the authorized operations of the unit on which the unit desires to claim exemption from Service Tax from the „Approval Committee‟. The Approval Committee constituted under the provisions of Section 13 of the Act of 2005 and which comprises of responsible officers had granted approval to the list of services for which the petitioner desired to claim exemption from Service Tax. Admittedly, the petitioner-unit also furnished a declaration, in Form A-1 verified by the Specified Officer of the SEZ along with the list of specified services. Once, the SEZ unit secures the approval of the „Approval Committee‟ to the list of the services on which the SEZ unit wishes to claim exemption from Service Tax and furnishes a declaration, in Form A-1 verified by the Specified Officer of the SEZ, it is rightly 25 Excise Appeal No.77603 of 2018 submitted on behalf of the petitioner that the respondent No. 2 or for that matter, any Jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise is enjoined with a duty to issue the authorization, in Form A-2. It is clear from Notification No. 12 of 2013, under which the petitioner- unit has exercised an option not to pay the Service Tax ab initio, that the respondent No. 2 was obliged to issue the authorization, in Form A-2 to the petitioner-unit in the circumstances of the case. Mere issuance of Form A-2 by the respondent No. 2 would not absolve the petitioner-unit of its liability to pay the Service Tax and cesses along with interest on delayed payment, if it is subsequently found that the petitioner-unit has not used the services exclusively for the authorized operations as per the undertaking, in Form A-1. In terms of Notification No. 12 of 2013, the petitioner-unit is enjoined with a duty to submit to the Superintendent of Central Excise, a quarterly statement, in Form A-3, furnishing the details of specified services received by it without payment of Service Tax. If that is so, the respondent No. 2 could not have refused the authorization to the petitioner-unit in Form A-2 on the ground that some of the claims made by the petitioner for refund had been rejected in the past. Ample safeguards are provided by Notification No. 12 of 2013 for recovery of sales tax and cesses along with interest on delayed payment if it is found that the specified services on which the exemption has been claimed, have not been used exclusively for authorized operations. We find that the respondent No. 2 was not justified in refusing the authorization in Form A-2 to the petitioner-unit for the reasons recorded in the impugned communication. There is nothing in Notification No. 12 of 2013 that prohibits an SEZ unit from availing the option of not paying the Service Tax ab initio, if the Positive Net Foreign Exchange is not achieved. At least, the respondent No. 2 has not pointed out any material in that regard. We do not find any propriety in the action on the part of the respondent No. 2 in refusing the authorization to the petitioner-unit in Form A-2 merely because 26 Excise Appeal No.77603 of 2018 M/s. Krishnapatnam Port Company Limited had failed to pay the Service Tax in respect of some services rendered to the petitioner-unit in the past. We find on a perusal of the documents annexed to the petition and the communications exchanged between the parties that the respondent No. 2 has illegally denied the benefit of Notification No. 12 of 2013 to the petitioner-unit."
9. In view of the above observations, we find that the facts are not in dispute that the appellant has provided the services to SEZ Unit by availing exemption and Form A-2 is to be issued by the Jurisdictional Deputy Commissioner, which was not under the control of the appellant.
Therefore, at this stage, on account of the procedural lapse, the benefit of Notification cannot be denied to the appellant as observed by the above cited decisions.
10. In view of this, we set aside the impugned order and allow the appeal with consequential relief, if any.
(Pronounced in the open court on 27.02.2026)
(Ashok Jindal)
Member (Judicial)
(K.Anpazhakan)
mm Member (Technical)