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2016 (7) TMI 307 - GUJARAT HIGH COURTTaxability of services provided by the SEZ unit to the DTA unit of the same assessee - principle of mutuality - Maintainability of appeal before the High Court - whether the appeal would lie before the Honble Supreme Court as provided under section 35(L) of the Act? - Demand of service tax with interest and penalty - The assessee opposed such proposal mainly on the ground that one unit of a company cannot provide service to another unit since for providing taxable service, it is necessary that there should be two separate entities. Held that:- the Special Economic Zones Act was enacted to provide for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto. - All the statutory provisions indicate separate and artificially created independent existence of a SEZ unit of a company whether it has another unit situated in Domestic Tariff Area or not. In particular, Rule 19(7) of the Special Economic Zones Rules, 2006 while recognising that the same legal entity may have two units, one in SEZ and another in DTA, mandates that the two would have distinct identities with separate books of accounts. For various purposes, thus a SEZ unit of an enterprise which also has an additional unit in Domestic Tariff Area, therefore, has a distinct identity. Its accounts are separate, its accounting would be separate. This artificial creation of separate accounting of a unit or an industry of a common enterprise or a company, is not a new or unknown phenomena. In number of cases, where Income Tax Act provides profit linked incentives such as deductions under sections 80HHC, 80I, 80IA, 80IB, etc., the industry or unit engaged in such eligible business is treated separate and distinct for the purpose of accounting so that deductions of the assessee out of its eligible business can be separately worked out. Under the circumstances, in view of statutory scheme noticed in the Finance Act, 1994 and Special Economic Zones Act, 2005, the contention of the respondent company that on the principle of mutuality, the services rendered by its SEZ unit to a Domestic Tariff Area unit, would not be chargeable to service tax, cannot be accepted. Valuation - free services - Held that:- When the service is provided but no value thereof is charged, there would be no question of collecting service tax. No provision has been brought to our notice in the Finance Act, 1994 under which though the service provider has not charged any value for service, service tax thereon still can be levied on its deemed value, be it market value or fair value. - if the department proceeds on the premise that a certain service though otherwise a taxable service, the service provider did not collect any charge for the same from the service recipient, in our opinion, it would simply not be possible for the authority to collect any service tax on such service. For such reasons, while therefore, dismissing the Revenue's appeal against the judgement of the Tribunal, on the grounds different from which appealed to the Tribunal, we answer the question clarifying that in the present case, no service tax was leviable since the SEZ unit of respondent assessee had not charged for the services provided to its DTA unit. - Decided against the revenue.
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