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Special Economic Zones (SEZ) — Exemption —Containers provided to units in SEZ — Exemption denied as containers partly used inside and partly outside SEZ — Containers used by units for bringing inputs and carrying finished goods out of SEZ — Impugned service of supply of containers, exempt.
Facts:
The appellants were engaged in providing containers to various units in SEZ. Service tax was demanded on the ground that containers have been used partly in and partly outside SEZ. According to the appellants, in terms of the SEZ Act, 005 and the Rules thereunder, payment of service tax was exempted if taxable services were provided to a unit in the SEZ and the appellants had exactly done that irrespective of the fact that the container had carried cargo out of the SEZ territory, exemption could not be denied to them. ST Notification No. 4/2004 which limits the exemption to service consumed within the SEZ uses the expression ‘for consumption of services’ within such SEZ, but at the same time, also uses the expression ‘taxable services provided to a unit of the SEZ.’
Held:
Section 26 of the SEZ Act and Rule 31 of the SEZ Rules, 2006 make it clear that there was no restriction regarding the consumption of the services and the exemption was extended to the services rendered to a unit in the SEZ for the purpose of authorised operation i.e., for bringing inputs for manufacture and carrying finished goods out of SEZ for export purpose, in the SEZ. Thus, the impugned services relating to supply of containers in SEZ units were exempted from service tax.
