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2016 (6) TMI 1125 - AT - Service TaxSpecial Economic Zone (SEZ) - services rendered to SEZ - surplus generated by trading of space purchased from airline operators in advance - Demand of services tax on services not consumed within SEZ income that was formerly recorded in the books of accounts as 'airline incentive' and now as 'expense reimbursement' which, according to Revenue, was a dressing up of commission received for 'marketing of service provided by client' within the ambit of section 65 (19) of Finance Act, 1996 defining 'business of auxiliary service'. - whether an unconditional exemption granted in a statute can be restricted by a statutory instrument issued in exercise of delegated authority under another statute that is hierarchically not even its equal in the event of a conflict. Held that:- Not surprisingly, the impugned order has not considered it necessary to render an independent finding and appears to have merely followed the earlier order. It would also amply demonstrate non-application of mind as the extended period has been invoked despite the acknowledgement of antecedent proceedings on the very same ground. We are also unable to appreciate that imperative for brevity in as serious a matter as recovery of tax that has been allegedly evaded. The demand of tax on rendering of 'business auxiliary service' is liable to be set aside on this ground alone. As no commission is involved in this trading of 'freight slots', the appellant can hardly be designated as commission agent. Therefore, pre-booking of slots which may realize upon allotment to a customer does not conform to the definition supra and hence is not liable to tax within the scope of the show cause notice. Demand of services tax on services not consumed within SEZ - scope of notification no. 4/2004-ST dated 31st March 2004. - The impugned order finds that the word 'consumption' used in the said notification does not permit tax exemption when services are rendered outside the Special Economic Zone. Of the amounts attempted to recovered ₹ 186397 pertains to the period December 2005 and January 2006. Held that:- There can, therefore, be no doubt about legislative intent to exempt tax on services required for performance of 'authorized operations' within a Special Economic Zone and any instrument, in exercise of authority to exempt a tax to issue instructions for uniformity of practice, would be presumptuous if it, advertently or otherwise, restricts legislative intent of the special law. That the Department of Revenue took three years to issue an exemption notification is neither a virtue to be proud of nor a defence to hang on to. We do notice that by relying upon an invalidated exemption notification the impugned order has deliberately ignored the primacy accorded by legislative sanction. The conflict between the exemption under section 26 of Special economic Zone Act, 2005 and the notification relied upon in the impugned order viz. notification 4/2004-ST is resolved in favour of the former with the latter relegated to redundancy since 10th February 2006. Such would be the fate of any superfluous notification issued under section 93 of Finance Act, 1994 that saddles the availing of exemption in section 26 of Finance Act, 1994 with conditions. For the period from February 2006, section 26 of Special Economic Zones Act, 2005 shall govern exemption in supply of services for units or developers in Special Economic Zones for their 'authorized operations' and the exemption notification 4/2004-ST dated 1st March 2004 is not valid for implementation to the extent that it imposes conditions not enacted in section 26 of Special Economic Zones Act, 2005 or contemplated in Rule 31 of Special Economic Zones Rules, 2006. The demand on the appellant in relation to services provided after January 2006 is set aside. For the two preceding months, the appellant shall be accorded the exemption if it cannot be established that services were rendered to a facility of the SEZ promoter outside the Zone.
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