The CESTAT cancels the request for tax on services

The Mumbai Bench of the Customs, Excise and Service Tax Appeals Tribunal (CESTAT) quashed the service tax claim and held that the exemption granted by section 26 of the Special Economic Zones Act 2005 is overriding in nature and that the breach of conditions is procedural.

The bench of two members of Ajay Sharma (judicial member) and CJ Mathew (technical member) held that the required documentation was not available throughout the duration of the litigation but, at the same time, it cannot be denied that at one point the eligibility existed. Procedural defects, for a more or less long duration, in no way supersede the exemption granted to the provision of services.

The appellant / assessee challenged the order made by the Commissioner for the recovery of Rs.11,89,13,942 as tax payable under Section 73 of the Finance Act 1994 for the period from 2008-09 to 2012-13 with applicable interest under article 75 of the 1994 finance law.

The assessee argued that the adjudication order failed to understand that the services he performed for M/s Credit Suisse Services (India) Pvt Ltd were not taxable due to the privileges conferred on the beneficiary by the Special Economic Zones Act 2005.

It was alleged that between June 2009 and February 2011, the appellant rendered taxable service valued at Rs. 80,16,46,587 out of which the liability of Rs. 8,25,69,598 should have been discharged. In accordance with the notification dated March 3, 2009 and amended by the notification dated May 20, 2009, request for reimbursement subject to compliance with the specified conditions. It was alleged that for the period from 1 March 2011 to 14 June 2011 the Appellant rendered taxable service worth Rs 16,86,45,901 on which the tax payable of Rs 1,73,70,528 should have been acquitted and, in accordance with notification no. 17/2011-ST dated March 1, 2011, should have been accompanied by Form A-1 which upon review was found not to have been verified until June 14, 2011.

It was alleged that the applicant, for the period from July 1, 2012 to March 31, 2013, had availed himself of a waiver against the AI ​​form, which, being only dated August 29, 2012, excluded the privilege between the 1st July 2012 and 28 August 2012, during which taxable service valued at Rs.12,92,07,189 was rendered without discharging a liability of Rs.1,59,70,009. In sum, the recovery of Rs. 11, 59, 10, 135 was ordered due to breach of a condition in the respective notifications embodying the procedure by which the appellant could have availed an exemption from tax on services for the provision of services to units located in special economic zones (SEZs).

The ministry alleged that a proportionate contribution to the expenses had been charged to their several subsidiaries which were deemed to be considered for the provision of “commercial ancillary services” in India for which liability had not been discharged.

CESTAT upheld the appeal and found that the demand for services allegedly rendered in India was not sustainable.

The court noted that the Special Economic Zones Act 2005 is significantly different from the rules that distinguish “exports” from “domestic supply” under the Services Tax Act regime and, having regard to Section 51 of the Special Economic Zones Act, 2005, should be read in the context of the exemption granted by Section 26 of the Special Economic Zones Act 2005 and not under the Act of finances of 1994. Consequently, the prism through which the jurisdictional perception was stated does not apply to the facts of the service rendered by the appellant.

Case Title: eClerx Services Limited v Commissioner of CGST and Central Excise

Citation: Service Tax Appeal No. 86312 of 2018

Date: 09/01/2022

Counsel for the applicant: lawyers Mihir Deshmukh and Ranjan Mishra

Counsel for the Respondent: Assistant Commissioner (AR) Dilip Shinde

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