Oral Judgment
Bhargav D. Karia, J.
1. Heard learned advocate Ms.Hardika A. Vyas for the appellant.
2. This Tax Appeal is filed under Section 35G of the Central Excise Act, 1944 proposing the following substantial questions of law arising out of the Judgment and Order dated 8th April, 2024 passed by the Customs, Excise and Service Tax Appellate Tribunal (for short 'the CESTAT') in Service Tax Appeal No.11552 of 2016-DB :
"(i) Whether the Hon'ble CESTAT is correct in holding that the exemption under Notification No. 09/2009-ST dated 03.03.2009 (as amended vide Notf. No.15/2009-ST dated 20.05.2009) admissible to Respondent for the entire period i.e. December, 2009 to March, 2014even through the said Notification specifically provides exemption to the services which are provided in relation to the authorised operations in a Special Economic Zone, and received by a developer or units of a Special Economic Zone; whereas in the present case the services have been provided by a sub-contractor to contractor and not directly to Developer or units of Special Economic Zone?
(ii) Further, whether the Hon'ble CESTAT iscorrect in holding that the exemption is available to the Services provided to a Unit in the Special Economic Zone by sub- contractor, whereas second proviso to Rule 10 of the SEZ, Rules, 2006 w.e.f. 03.02.2009, allows exemption of services provided by a contractor / sub-contractor, provided only to Developer or Co-Developer of Special Economic Zone and not to Unit in Special Economic Zone?
(iii) Whether the Hon'ble CESTAT is correct in allowing the appealby holding thatexemption is available to Respondent particularly after the issuance of Notification Nos. 17/2011-ST dated 01.03.2011 & 12/2013-ST dated 01.07.2013, wherein it is statutory requirement for Respondent to submit Forms A-1 A-duly verified by the Specified Officer of SEZ and authorised by the Jurisdictional Central Excise Officer and this condition has not been fulfilled by the Respondent?
(iv) Whether the Hon'ble CESTAT correctly allowed the appeal by determining that the exethe authorizationmption applies to the respondent, irrespective of the authorization certificate No.KASEZ/P&C/281)7-08 dated November 26, 2009, issued by the Development Commissioner of Dahej SEZ wherein M/s. ONGC and M/s. Samsung are named to be entitled to exemptions from duties, taxes, cess and drawbacks, which raises the issue of whether the subcontractor, M/s. Randhawa, is entitled to theses exemptions?."
3. The brief facts of the case are as under:
3.1. The assessee was engaged in providing erection, commissioning and installation service and other construction activities and was registered under the Service Tax Authorities. For the period from 2009-10 to 2013-14, the assessee entered into a contract as a subcontractor with M/s.Samsung Engineering Company Limited, who was appointed as a contractor by M/s.ONGC Petro Additons Limited, a SEZ unit situated at SEZ Dahej for carrying out construction work and providing goods and other services as per the contract. The assessee in the capacity of sub-contractor of M/s.Samsung Engineering Company Limited claimed exemption from service tax as per Notification No.9/2009-ST dated 3rd March, 2009 as amended by Notification NO.15/2009- ST dated 20th May, 2009 and other amendments.
3.2. The Department thereafter, during the course of audit of financial records of the assessee, raised a query that the assessee failed to furnish authorisation in terms of Form A-1 and A-3 and therefore, not entitled to exemption as per the Notification No.09/2009-ST as amended from time to time.
3.3. A show-cause notice was issued, which was adjudicated by Order-in-Original dated 16th May, 2016 raising a demand of service tax of Rs.3,85,72,267/- payable by the assessee along with penalty and interest under Section 78(1) of the Finance Act, 1994.
3.4. Being aggrieved, the assessee preferred an Appeal before the CESTAT contending inter-alia that the assessee being the service provider, by a sub- contractor to a unit located in SEZ, is eligible for exemption benefit in terms of the Notification No.9/2009-ST. It was contended that the Adjudicating Authority was incorrect in holding that exemption is available only to services provided by main contractor and received by a developer or units of SEZ, as approval from the Approval Committee was provided for the contractor, to whom the contract for services have been entered into by developer or SEZ Unit and not to the sub-contractor. It was also contended that the requirement of furnishing a declaration in Form A-1 was introduced by amendment in Notification No.9/2009-ST in amendment No.17/2011 whereas, the demand raised in the case of the assessee was for the period prior to March, 2011 and the same is not sustainable in absence of any requirement of making declaration made in Form A-1 by the assessee prior to such amendment.
3.5. It was also contended by the assessee that as per the provisions of Section 26 of the SEZ Act, all activities and services rendered in SEZ area for SEZ developer or SEZ unit are exempted from service tax.
3.6. The CESTAT after considering the submissions of the parties allowed the Appeal in favour of the assessee relying upon the decision of the Co-ordinate Bench of the Tribunal in case of M/s.Shyam Engineers in Final Order No.12201/2023 dated 7th August, 2023 and Rishabh Construction Company reported in 2023 (10) TMI 596-CESTAT Ahmedabad.
3.7. Referring to the above decisions of the Co-ordinate Bench, the CESTAT held that the substantial benefits of exemption notification cannot be denied merely on small infringement of procedural requirement.
4.1. Learned advocate Ms.Hardika Vyas for the appellant-Revenue submitted that as per the Notification No.9/2009-ST, exemption is subject to the conditions stated in Clause- 2 of the said Notification and assessee being a sub-contractor, is not entitled to the benefits of such exemption Notification. Reference was made to the Certificate issued by the Ministry of Development Commissioner, Dahej, Special Economic Zone, which is placed in the paper-book at page No.12, to point out that the Certificate, as per Rule 27 of the SEZ Rules, 2006, as amended from time to time, is issued in name of M/s.Samsung Engineering Co. Ltd., to whom, the contract was awarded by M/s.ONGC Petro Additions Ltd. and hence, in absence of the Certificate for exemptions from payment of service tax, assessee is not entitled to such exemption under Notification No.9/2009-ST, as amended from time to time.
4.2.It was submitted that the Appeal may be admitted for consideration of the substantial questions of law arising from the impugned order of the CESTAT.
5. Having heard the learned advocate for the appellant-Revenue, the short question which is raised in this Appeal is as to whether, the assessee being a sub- contractor to the main contractor M/s.Samsung Engineering Co. Ltd., which was appointed for rendering services to M/s.ONGC Petro Additions Ltd., Dahej is entitled for the benefit of Notification No.9/2009-ST dated 3rd March, 2009 as amended by various Notifications, being a sub-contractor or not.
6. The Adjudicating Authority has denied the benefits of such exemption under the Notification No.9/2009-ST to the assessee by observing as under:
"22.6. I therefore find that from the overall facts of the case seen in the light of the existing provisions, in- admissibility of the exemption on the taxable services provided by a subcontractor to the Contractor of a SEZ Unit is expressly clear. Nowhere in the SEZ Act, 2005 and the Rules framed there- under or under any Notification issued in relation thereto as well as under any statutory provisions of the Finance Act,1994 (as amended) there is any such provisions of exemption from levy of Service Tax on the taxable services when provided by a sub-contractor to the Contractor of a SEZ Unit, Further, levy of service tax is by virtue of the Finance Act, 1994 and no levy can be imposed by way of instructions/circular by the Board this regard, the recent decision of Hon. Tribunal in the case of M/s. Sew Construction Ltd. Vs. CCE, Raipur-2011(22) STR 666 (Tri.-Del) is most relevant. It was held by the CESTAT that -
"5. We do not find any provision in the Finance Act, 1994 to grant immunity to the subcontractor from levy of service tax when undisputedly taxable services were provided by them. No evidence was before us to notice whether the service provided by the subcontractor to the contractor was ever been taxed. We noticed that para 9 of the Larger Bench decision in the case of M/s. Vijay Sharma & Co. cited by the learned AR clearly speaks that a sub-contractor shall not be immune from service tax under Finance Act, 1994.
The said para 9 is reproduced below for appreciation.
In view of the foregoing discussion, it is clear that even when service is provided in the category of sub-contractor, he is liable to pay service tax. This view is also supported by Board's circular No. 96/7/2007-ST dated 23.08.2007 and 138/7/2011-ST dated 06.05,2011 as elucidated above. Under the circumstances. I find M/s Randhawa not eligible for the exemption on the taxable services provided by them as sub-contractor to M/s Samsung."
7. The only ground on which the exemption is denied by the Adjudicating Authority is due to the provisions of the SEZ Act, 2005 and the Rules framed thereunder, as such provisions do not refer to the Sub- Contractor to the Contractor of SEZ unit.
8. It appears that the Adjudicating Authority has failed to consider the purpose and object of the Notification No.9/2009-ST, which reads as under:
"Notification No.9/2009-Service Tax G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), and in supersession of the notification of the Government of India, Ministry of Finance (Department of Revenue), No. 4/2004- Service Tax, dated the 31st March, 2004, published in the Gazette of India, Extraordinary, Part Il, Section 3, Sub- section (i) hereby exempts the taxable services specified in clause (105) of section 65 of the said Finance Act, which are provided in relation to the authorised operations in a Special Economic Zone, and received by a developer or units of a Special Economic Zone, whether or not the said taxable services are provided inside the Special Economic Zone, from the whole of the service tax leviable thereon under section 66 of the said Finance Act:
Provided that-
(a) the developer or units of Special Economic Zone shall get the list of services specified in clause (105) of section 65 of the said Finance Act as are required in relation to the authorised operations in the Special Economic Zone, approved from the Approval Committee (hereinafter referred to as the specified services);
(b) the developer or units of Special Economic Zone claiming the exemption actually uses the specified services in relation to the authorised operations in the Special Economic Zone;
(c) the exemption claimed by the developer or units of Special Economic Zone shall be provided by way of refund of service ta paid on the specified services used in relation to the authorised operations in the Special Economic Zone;
(d) the developer or units of Special Economic Zone claiming the exemption has actually paid the service tax on the specific services;
(e) no CENVAT credit of service tax paid on the specified services used in relation to the authorised operations in the Spe Economic Zone has been taken under the CENVAT Credit Rules, 2004;
(f) exemption or refund of service tax paid on the specified services used in relation to the authorised operations in the Special Economic Zone shall not be claimed except under this notification."
9. The exemption contained in the aforesaid Notification is subject to the conditions specified in Clause-2 of the said Notification, which read as under:
"2. The exemption contained in this notification shall be subject to the following conditions, namely:-
(a) the person liable to pay service tax under sub-section (1) or sub-section (2) of section 68 of the said Finance Act shall pay service tax as applicable on the specified services provided to the developer or units of Special Economic Zone and used in relation to the authorised operations in the Special Economic Zone, and such person shall not be eligible to claim exemption for the specified services:
Provided that where the developer or units of Special Economic Zone and the person liable to pay service tax under subsection (2) of section 68 for the said services are the same person, then in such cases exemption for the specified services shall be claimed by that person;
(b) the developer or units of Special Economic Zone shall claim the exemption by filing a claim for refund of service tax paid on specified services;
(c)the developer or units of Special Economic Zone shall file the claim for refund to the jurisdictional Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be;
(d) the developer or units of Special Economic Zone who is not registered as an assessee under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder, or the said Finance Act or the rules made thereunder, shall, prior to filing a claim for refund of service tax under this notification, file a declaration in the Form annexed hereto with the respective jurisdictional Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be;
(e) the jurisdictional Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall, after due verification, allot a service tax code (ST) number to the developer or units of Special Economic Zone within seven days from the date of receipt of the said Form;
(f) the claim for refund shall be filed, within six months or such extended period as the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall permit, from the date of actual payment of service tax by such developer or unit to service provider;
(g) the refund claim shall be accompanied by the following documents, namely. -
(i) a copy of the list of specified services required in relation to the authorised operations in the Special Economic Zone, as approved by the Approval Committee;
(ii) documents for having paid service tax;
(iii) a declaration by the Special Economic Zone developer or unit, claiming such exemption, to the effect that such service is received by him in relation to authorised operation in Special Economic Zone.
(h) the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case maybe, shall, after satisfying himself that the said services have been actually used in relation to the authorised operations in the Special Economic Zone, refund the service tax paid on the specified services used in relation to the authorised operations in the Special Economic Zone;
(i) where any refund of service tax paid on specified services is erroneously refunded for any reasons whatsoever, such service tax refunded shall be recoverable under the provisions of the said Finance Act and the rules made thereunder, as if it is a recovery of service tax erroneously refunded."
10. Therefore, on perusal of the Notification No.9/2009-ST, it appears that the exemption from payment of service tax is granted to the taxable services specified in Clause (105) of Section 65 of the Finance Act, 1994, which are provided in relation to the authorised operations in the SEZ. It is not in dispute that the assessee has provided the taxable services to the SEZ Unit, and the assessee has also not violated any condition stipulated in the said Notification. The requirement of submission of Form A-1 is introduced vide amendment as per the Notification No.17/2011-ST dated 1st March, 2011, however, the period for which the show- cause notice was issued, was for the period from 2009-10 onwards.
11. Moreover, the procedure prescribed for issuing declaration in Form A-1 is only procedural and hence, the Tribunal has rightly referred to and relied upon the decision of the Co-ordinate Bench of the Tribunal in case of M/s.Shyam Engineers (Supra) wherein, in similar facts, it was held that the sub-contractor is entitled to the exemption as per Notification No.9/2009-ST because, as per the plain reading of the Notification, the only criteria is that the service which is provided should be in relation to the authorised operations in the SEZ and received by the developer in the Unit of SEZ. The assessee in the facts of the case, has admittedly provided services, which are approved by the concerned Authority in relation to the authorised operation in the SEZ and only because the Certificate is issued in name of M/s.Samsung Engineering Co. Ltd., for whom the assessee has worked as a sub-Contractor, the condition of providing service to the authorised person has been satisfied by the assessee. Therefore, the exemption has rightly not been denied by the CESTAT to the assessee.
12. In view of the foregoing reasons, we are of the opinion that there is no legal infirmity in the impugned Judgment and Order of the Tribunal holding that the benefits of exemption Notification cannot be denied merely on small infringement of the procedural requirement and hence, no question of law, much less any substantial question of law, can be said to have arisen from the impugned order of the Tribunal. Hence, the Appeal is accordingly, dismissed.
