Custom, Excise & Service Tax Tribunal
-Delhi Ii vs Cushman And Wakefield Property ... on 4 May, 2023
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. 1
Service Tax Appeal No. 50346 of 2017
(Arising out of Order-in-Appeal No. DLI-SVTAX-002-COM-024-16-17 dated
17.10.2016 passed by Commissioner of Service Tax, Delhi-II, 5th Floor, 14-15 Farm
Bhawan, Nehru Place, New Delhi-110019)
Commissioner of Service Tax Delhi-II,
New Delhi ...... Appellant
VERSUS
M/s Cushman and Wakefield Property
Management Service India Pvt. Ltd. ...... Respondent
B-6/8, Commercial Complex, Opp. Deer Park,
Safdarjung Enclave, New Delhi-110029
APPEARANCE:
Mr. Rajeev Kapoor, Authorized Representative of the Department
Mr. Siddharth Punj, Advocate for the Respondent
CORAM :
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MS. HEMAMBIKA R PRIYA, MEMBER (TECHNICAL)
FINAL ORDER NO._50641/2023_
DATE OF HEARING: May 04, 2023
JUSTICE DILIP GUPTA
The order dated 17.10.2016 passed by the Commissioner to
the extent it has dropped the demand of service tax has been assailed
by the Department in this appeal.
2. The respondent had availed exemption from payment of service
tax for services provided to Special Economic Zones1 but did not
1. SEZ
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ST/50346/2017
provide documentary certificates to support its claim of exemption, as
was required under the notifications dated 03.03.2009 and
01.03.2011. Accordingly, a show cause notice was issued to the
respondent and the Commissioner by the impugned order has partially
dropped the demand of service tax.
3. The relevant findings recorded by the Commissioner are
reproduced below:-
" 4.3.7. From the facts above, it is clear that the provisions
under the SEZ Act, 2005 provide ab initio exemption to
service tax for services received by the units operating in SEZ.
Further these provisions have an overriding effect over
anything inconsistent therewith contained in any other law
for the time being in force. As there is no dispute that services
were actually provided by the noticee and consumed in the SEZ,
substantial benefit cannot be denied. In light of the above
findings, I hold that the Noticee is eligible to exemption of
service tax for services provided to units located in SEZ and I
drop the demand of Rs. 38,86,015/-. Since there is no demand,
there is no question of interest under Section 75 or penal
consequences under Section 76 or 78 of the Act ibid.2."
(emphasis supplied)
4. It is this dropping of the demand that has led to the filing of this
appeal by the department.
5. The applicability of the notifications issued under section 93(1) of
the Finance Act, 19942, which exempt taxable services provided in
relation to the authorized operations in SEZ, has been considered by
the Tribunal in SRF Ltd. Vs. Commissioner of Customs, Central
Excise & Service Tax, LTU, New Delhi3 wherein after analyzing the
provisions of the Special Economic Zones Act, 20054, the provisions of
notifications issued under the provisions of section 93(1) of the Finance
Act and the decision of the Telangana High Court in GMR Aerospace
2. The Finance Act
3. 2022 (64) GSTL 489 (Tri.-Del.)
4. SEZ Act
3
ST/50346/2017
Engineering Limited and another Vs. Union of India and Others5,
the Tribunal observed as follows:-
17. The Notification dated March 3, 2009 has been issued in exercise
of the powers conferred by section 93 (1) of the Finance Act. It is for
this reason that it has been contended by learned Counsel for the
appellant that the said Notification dated March 3, 2009 would not
have any relevance to the case of the appellant when it sought
exemption from payment of service tax under the provisions of section
26(1)(e) of the SEZ Act read with rule 31 of the SEZ Rules.
18. The contention advanced by the learned Counsel for the appellant
has force. As noticed above, section 26(1) of the SEZ Act provides
that subject to the provisions of the sub-section (2), every Developer
shall be entitled to exemptions and the exemption at (e) exempts
every Developer from service tax under Chapter-V of the Finance Act
on taxable services provided to a Developer or unit to carry on the
authorized operations in a SEZ. Section 51 of the SEZ Act provides for
an overriding effect to the provisions of the SEZ Act. The provisions
of section 26 read with rule 31 of the SEZ Rules thus, have overriding
effect over anything inconsistent contained in any other law for the
time being in force, which would include the Finance Act. It needs to
be noted that the Notification dated March 3, 2009 has been issued in
exercise of the powers conferred by section 93 of the Finance Act.
Thus, when the services rendered by the appellant are fully exempted
from service tax in terms of the provisions of the SEZ Act, the
condition of exemption by way of refund imposed under the
Notification issued under the Finance Act would be inconsistent with
the provisions of the SEZ Act. It also needs to be noted that the SEZ
Act was enacted in 2005, much after the enactment of the Finance
Act in 1994.
19. This issue was examined by the Telangana and Andhra Pradesh
High Court in GMR Aerospace Engineering Limited and another
Vs. Union of India and Others [2019 (8) TMI 748]. The second
petitioner, a Developer of GMR Hyderabad Aviation SEZ, entered into
a sub-lease agreement with the first petitioner for rendering certain
services. It, however, claimed examination on the ground that under
section 26(1)(e) of the SEZ Act, every Developer was entitled to
exemption from service tax under Chapter-V on the Finance Act on
taxable services provided to a Developer or unit to carry on the
authorized operations in a SEZ and the same was not dependent upon
the conditions stipulated in the Notification issued under section 93 of
the Finance Act.
20. It is in this context that the Andhra Pradesh High Court observed
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" 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:
5 2019(8) TMI 748
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ST/50346/2017
"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 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.
29. The contention of Smt. Sundari R. Pisupati, learned
Senior Standing Counsel is that there is no inconsistency
between (i) 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 firth 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 word "prescribe" but the SEZ Act
2005 defines the 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 terms and
conditions prescribed in rule 22 with the terms and
conditions prescribed in the Notifications issued under any
one of the five enactments listed in section 26(1) to find
out whether there was any inconsistency.
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
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ST/50346/2017
for finding out whether a unit in a SEZ qualifies for
exemption or not."
(emphasis supplied)
21. Thus, what follows is that the Commissioner was not justified in
examining whether the conditions set out in the Notification dated
March 3, 2009 were satisfied or not for grant of any exemption from
service tax. Section 26(2) of the SEZ Act does provide that the Central
Government may prescribe the manner in which, and the terms and
conditions subject to which, the exemptions shall be granted to the
Developer under sub-section (1) but what is important to notice, and
as was also observed by the Andhra Pradesh High Court, the word
"prescribe" would mean "prescribed by rules made by the Central
Government under the SEZ Act," in view of the definition of
"prescribed" under section 2(w) of the SEZ Act. The Notification dated
March 3, 2009, which has been issued under section 93 of the Finance
Act, therefore, has no application."
36. Special Economic Zones created under the SEZ Act are on a
different footing because the SEZ Act itself exempts goods and
services supplied for authorised operations to developers and units in
the SEZs from the Customs Duty, Central Excise Duty and Service
Tax. The provisions of SEZ Act prevail over any other law. Section
26 (1) of the SEZ Act, 2005 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;
XXXXXXXXXX
(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;
37. Thus, Section 26(1) of the SEZ Act is inconsistent with the three charging sections viz., Section 3 of the Central Excise Act, 1944, Section 12 of the Customs Act, 1962 and Sections 66, 66A and 66B of Chapter V of the Finance Act, 1994. In addition to the general principle of a specific law (pertaining to SEZ) prevailing over the general law (levying customs, central excise or service tax) and the later enactment (such SEZ Act, 2005) prevailing over the earlier enactments (Central Excise Act, 1944, Customs Act, 1962 and Finance Act, 1994), in the SEZ Act, the Parliament has explicitly resolved this 6 ST/50346/2017 inconsistency between the laws. 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 time being in force or in any instrument having effect by virtue of any law other than this Act.
38. 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.
39. The charging sections, having been overridden by the SEZ Act passed by the Parliament, 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.
40. Therefore, there is no need for any exemption notifications under any of these three Acts nor is it necessary to fulfil any conditions of any of the conditions laid down in 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 66B 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 section 51 of the SEZ Act, overridden the charge in the other laws.
48. Thus, as the charge of service tax under the Finance Act, 1994 on the services provided for authorised operations of the appellant are overridden by section 51 of the SEZ Act, 2005, any exemption notifications for such services as well as the conditions laid down in them are redundant. Service tax, if any, paid on such input services for authorised operations need to be refunded to the appellant. We also find no force in the other grounds raised for denying the refund of service tax paid and discussed above.
6. Shri Rajeev Kapoor, learned authorized representative appearing for the department, however, submitted that in view of the provisions of section 26(2) of the SEZ Act, the exemption could have been claimed by the appellant only in accordance with the provisions of section 93(1) of the Finance Act.
7. This submission has been dealt with by the Tribunal in SRF Ltd.
and it has held that the exemption notification should have been issued under section 26(2) of the SEZ Act and the notifications issued under 7 ST/50346/2017 the Finance Act, in view of the provisions of SEZ Act, would have no application.
8. It needs to be noted that the decision of the Tribunal in SRF Ltd was subsequently followed by the Tribunal in Lupin Limited Vs. Commissioner of Central Goods & Service Respondent Tax & Central Excise6
9. Thus, for all the reasons stated above, the appeal filed by the department deserves to be dismissed and is dismissed.
(Order dictated and pronounced in the open Court) (JUSTICE DILIP GUPTA) PRESIDENT (HEMAMBIKA R PRIYA) MEMBER (TECHNICAL) Rekha
6. MANU/CE/0134/2023, E/51193 & 51194 / 2019 decided on 23.03.2023