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2016 (6) TMI 1125

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..... 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 .....

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..... ction 76 and 78 of Finance Act, 1994. The impugned order also confirmed interest of ₹ 1923/- on delayed payment of tax paid in October and November 2006 and for the first quarter of 2007 which was deposited before the impugned order was passed and is not under challenge. The disputes relate to claim for exemption from tax on services rendered to M/s Nokia India Pvt. Ltd., a unit in a Special Economic Zone, in connection with import and export of goods during the period from December 2005 to July 2007 and the taxability of surplus generated by advance booking of space for air freight. 2. During the period in dispute, the operations were being carried out by M/s Excel India Pvt. Ltd registered as a service-provider in Chennai and proceedings were initiated upon audit of assessee by that jurisdiction between 6th August 2007 and 8th August 2007. Having come under the name and style of M/s DHL Lemuir Logistics Pvt. Ltd and having obtained centralised registration on 24th November 2007, the jurisdiction shifted to Commissioner of Service Tax, Mumbai who issued the show cause notice dated 25th April 2008. 3. Before proceeding to consider the rival contentions on the demand rel .....

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..... siness Auxiliary Service. This matter has been dealt with in the Show Cause Notice issued by Service Tax. Chennai under SCN No. 196/2006 dated 23.10.2006. The grounds for the same are not repeated here for the sake of brevity but the arguments mentioned in the Show Cause Notice relating to 'Business Auxiliary Service' will be applicable in the present notice also. 4. We observe that no effort has been taken to ascertain whether the said amount was a consideration, whether the airline was a client and whether any marketing had indeed been undertaken. A surmise has been followed by an even more bizarre justification of the brevity. And, in the pursuit of that brevity, a passing reference has been made to a show cause notice that has been adjudicated in a different corner of the country at some time in the past, which, purportedly, is sufficient elaboration of the present allegation against the assessee. There is probably no other more illustrative example of lack of diligence in establishing a charge against a noticee and of utter disregard for the principles of natural justice - issue of a notice which is deafeningly silent on the grounds for arriving at the allegation .....

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..... n allotted by the airline; that is a business decision of the logistics entity. In such a model, there is no flow of consideration from the airline to logistics entities such as the appellant. On the contrary, the charges for pre-booking are made over by the appellant to the airline. It receives consideration from its consignor-clients for allotment of such pre-booked space. Essentially, every such pre-booked slot is bought from the airline and sold to the consignor-clients. The two transactions are independent with no contact between the consignor and the airlines. It is the consignor who is the client of the appellant and not the airline. Space offered by the airlines is not being marked by the appellant, on the contrary, pre-booked space is sold to consignors by the appellant. 7. In the context of these contra transactions of specified space on the air carrier, we examine the taxable service and the definition thereto. The taxable service according to section 65(105)(zzb) of Finance Act, 1994 is that provided or agreed to be provided: to a client, by any person in relation to business auxiliary service.' and relevant extract or section 65(19) of Finance Act, 1994 .....

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..... 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. 9. Learned Counsel for appellant relies on the provisions of the Special Economic Zone Act, 2005, decisions of the Hon'ble High Court of Delhi in Jindal Stainless Steel another v. Union of India [AIT-201-284-HC] which set aside circular dated 3rd April 2008 on the ground of inconsistency with the Special Economic Zones Act, 2005, and Federation of Indian Airlines v Union of India [WP (c) No 8004/2010] on the vires of subordinate legislation. Reliance was also placed on the decision of the Tribunal in Norasia Container Lines v Commissioner of Central Excise, New Delhi [2011 (23) STR 295 (Tri Del)] and Maersk India Pvt Ltd. v Commissioner of Service Tax, Chennai [2011 (23) STR 169 (Tri-Chennai)] . It was submitted the services rendered by the appellant are arrangement of transportation of goods to the airport and port with atten .....

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..... Government being satisfied that it is necessary in the public interest so to do, hereby exempts taxable service of any description as defined in clause (90) of sub-section (1) of section 65 of the said Act provided to a developer of Special Economic Zone or a unit (including a unit under construction) of Special Economic Zone by any service provider for consumption of the services within such Special Economic Zone, from the whole of service tax leviable thereon under section 66 of the said Act, subject to the following conditions, namely:- (i) the developer has been approved by the Board of Approvals to develop, operate and maintain the Special Economic Zone; (ii) the unit of the Special Economic Zone has been approved by the Development Commissioner or Board of Approvals, as the case may be, to establish the unit in the Special Economic Zone; (iii) the developer or unit of a Special Economic Zone shall maintain proper account of receipt and utilisation of the said taxable services. Explanation .- For the purposes of this notification,- (1) Board of Approvals means the combined Board of Approvals for export oriented unit and Special Economic Zone unit .....

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..... to the extent that it is perceived to be within the boundaries of the Special Economic Zone. 13. While exemption of duties of central excise and customs for such designated zones were in existence since 1965 when the first zone was set up, exemption from service tax was of recent origin and can be traced to the policy of allowing availment of CENVAT credit of such tax. With the produce of Special Economic Zone entities being exported out of the country, the mechanism for neutralization of all the indirect taxes incurred on the goods was extended to service tax also. 14. The exemptions that are accorded to Special Economic Zone entities are availed by the entity for imports, extended to suppliers of indigenous inputs by documentation and verification akin to export procedures. Services, being intangible and of much later vintage, has been a fertile ground for denial of tax neutralization by an over-cautious tax administration. The privilege of exemption that is available to Special Economic Zone entities depend, to a large extent, on the conviction on the part of the service provider that he will not burdened on a later date with the tax that was not collected from the zone en .....

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..... the imperative of taxing goods that, instead of being exported, were cleared into the local market as excise on manufactured goods but, owing to the duty exemptions, at rates applicable to imported goods. That statutory anchor was erased and replaced by incorporating chapter XA in Customs Act, 1962 through an amendment in Finance Act, 1992 and made effective from 11th May 2004. This was intended to align the status of these zones with the evolution of these from 'bonded areas' to outside customs jurisdiction areas. 'Consequently, import duties were 'zero rated' and customs duties leviable, if, instead of exports, goods were cleared into the 'domestic tariff area'. The statutory status of these newly-designated 'special economic zones' stood on firmer ground. Exemption under section 25 of Customs Act, 1962, not being warranted any longer, were accordingly signed out of existence. The principle is unambiguously clear - exemptions accorded by legislative action do not require reinforcement under the exempting power of the Central Government. 17. The Special Economic Zones Act, 2005 was notified on 10th February 2006 to provide a legal framework .....

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..... nit by the service providers located outside India to carry on the authorised operations by the Developer or entrepreneur; (e) exemption from service tax under Chapter-V of the Finance Act, 1994 (32 of 1994) on taxable services provided to a Developer or Unit to carry on the authorised operations in a Special Economic Zone; (f) exemption from the securities transaction tax leviable under section 98 of the Finance (No. 2) Act, 2004 (23 of 2004) in case the taxable securities transactions are entered into by a non-resident through the International Financial Services Centre; (g) exemption from the levy of taxes on the sale or purchase of goods other than newspapers under the Central Sales Tax Act, 1956 (74 of 1956) if such goods are meant to carry on the authorised operations by the Developer or entrepreneur. (2) The Central Government may prescribe the manner in which, and the terms and conditions subject to which, the exemptions, concessions, drawback or other benefits shall be granted to the Developer or entrepreneur under sub-section (1). The powers delegated to the Central Government to prescribe the manner and conditions of availment were exercised by i .....

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..... 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. Apparently, the myth of finality and prevalence of the last word vesting in the tax collecting department is sought to be perpetuated at the cost of legislative dignity. 20. We have no doubt that some form of directive was necessary at that point in time to implement the popular will articulated in a statute of such import as the Special Economic Zones Act, 2005. An uninstructed tax mechanism that had no cause to acquiesce gracefully in exclusion of its jurisdiction by statutory mandate would well have required a diktat of some sort for the privilege of tax exemption to be accorded to the beneficiaries of parliamentary sanction. Exemption of duties was not only familiar from long years of practice under the predecessor schemes, by whatever name called, but also owing to its physical form, amenable to any check or verification. The very nature and manifestation of service transactions precluded the satisfaction of ascertainment of arrival at the intended destination. This lack of familiarity did .....

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..... xisting statutory provision under the Customs Act, 1962 were also made non-applicable by '52. The provision contained in the Chapter X-A of the Customs Act, 1962 and the Special Economic Zones Rules, 2003 and the Special Economic Zones (Customs Procedure) Regulations, 2003 made thereunder shall not with effect from such date as the Central Government by notification appoint, apply to the Special Economic Zones.' That the provisions of this law prevail over others is also articulated by '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.' In the event of a dispute, the legal position is not in doubt; the exemption in Special Economic Zones Act, 2005 will prevail. The objective of the Special Economic Zones Act, 2005 being the avoidance of any impediment to the operation of 'foreign exchange generating entities', the obligation to eliminate the scope for disputes is also binding on different departments of the Government of India. The Department of Revenue did n .....

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..... heme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place.' it goes to enunciate that '29. It is well established that when a general law and a special law dealing with some aspect dealt with by the general law are in question, the rule adopted and applied is one of harmonious construction whereby the general law, to the extent dealt with by the special law, is impliedly repealed. This principle finds its origins in the latin maxim of generalia specialibus non derogant, i.e., general law yields to special law should they operate in the same field on same subject. 30. Generally, the principle has found vast application in cases of there being two statutes: general or specific with the latter treating the common subject matter more specifically or minutely than the former. Corpus Juris Secundum, 82 C.J.S. Statutes 482 states that when construing a general and a specific statute pertaining to the same topic, it is necessary to consider the statutes as consistent with one another and such statutes therefore should be harmonized, .....

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..... yield better results: To arrive at the real meaning, it is always necessary to get an exact conception of the aim, scope, and object of the whole Act: to consider, according to Lord Coke: (1) What was the law before the Act was passed; (2) What was the mischief or defect for which the law had not provided; (3) What remedy Parliament has appointed; and (4) The reason of the remedy. (emphasis supplied) 38. In LIC v. D.J. Bahadur, (1981) 1 SCC 315 this Court was confronted with the question as to whether the LIC Act is a special legislation or a general legislation and while considering the rule in discussion, this Court observed thus: 49. the legal maxim generalia specialibus non derogant is ordinarily attracted where there is a conflict between a special and a general statute and an argument of implied repeal is raised. Craies states the law correctly: The general rule, that prior statutes are held to be repealed by implication by subsequent statutes if the two are repugnant, is said not to apply if the prior enactment is special and the subsequent enactment is general, the rule of law being, as stated by Lord Selbourne in Sewards v. Vera Cruz, ' .....

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..... the intendment of the Act. With this basic principle in mind, the provisions must be examined to find out whether it is possible to construe harmoniously the two provisions. If it is not possible then an effort will have to be made to ascertain whether the legislature had intended to accord a special treatment vis- -vis the general entries and a further endeavour will have to be made to find out whether the specific provision excludes the applicability of the general ones. Once we come to the conclusion that intention of the legislation is to exclude the general provision then the rule general provision should yield to special provision is squarely attracted. 42. Having noticed the aforesaid, it could be concluded that the rule of statutory construction that the specific governs the general is not an absolute rule but is merely a strong indication of statutory meaning that can be overcome by textual indications that point in the other direction. This rule is particularly applicable where the legislature has enacted comprehensive scheme and has deliberately targeted specific problems with specific solutions. A subject specific provision relating to a specific, defined and des .....

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..... the jurisdictional powers of these Tribunals. The Tribunals are competent to hear matters where the vires of statutory provisions are questioned. However, in discharging this duty, they cannot act as substitutes for the High Courts and the Supreme Court which have, under our constitutional set-up, been specifically entrusted with such an obligation. Their function in this respect is only supplementary and all such decisions of the Tribunals will be subject to scrutiny before a Division Bench of the respective High Courts. The Tribunals will consequently also have the power to test the vires of subordinate legislations and rules. However, this power of the Tribunals will be subject to one important exception. The Tribunals shall not entertain any question regarding the vires of their parent statutes following the settled principle that a Tribunal which is a creature of an Act cannot declare that very Act to be unconstitutional. ... We may add that the Tribunals will, however, continue to act as the only courts of first instance in respect of the areas of law for which they have been constituted. By this, we mean that it will not be open for litigants to directly approach the High .....

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