Notification No. 4/2004-ST being a conditional exemption notification issued under Section 93 of the Finance Act, 1994, cannot be interpreted on the basis of the provisions of SEZ Act, 2005 or the Rules made thereunder and the conditions specified therein have to be fully satisfied for availing the benefit under the said notification. Further, as observed earlier, the notification came into force much before the Special Economics Zone Act or the Rules made there under came into force. If the intention of the legislature was to align the exemption with section 26 of the SEZ Act or Rule 31 of the SEZ Rules, then notification No. 4/2004-ST would have been amended to reflect the same. No such amendment has been carried out in the said notification. In these circumstances, we are of the view that if the services are not consumed within the Special Economic zone, then the benefit of notification No. 4/2004-ST will not be available.
CESTAT, MUMBAI BENCH
DHL Lemuir Logistics (P.) Ltd.
v.
Commissioner of Central Excise, Mumbai
ORDER NO. S/644/2012/CSTAB/C-I
APPLICATION NO. ST/S/52 of 2012
APPEAL NO. ST/11 of 2012
MAY 16, 2012
ORDER
P. R. Chandrasekharan, Technical Member – This appeal and stay application are directed against order-in-original No. 56/BR-56/ST/Th-I/2011 dated 30/09/2011 passed by the Commissioner of Central Excise, Thane-I. The stay application is being taken up for consideration.
2. The appellant, M/s. DHL Lemuir Logistics Pvt. Ltd., Chennai, is engaged in rendering of services of Custom House Agent, Clearing and Forwarding Agent, Storage and Warehousing, Business Auxillary Service, Transport of goods by road and Business Support Service, etc. During the course of audit of the records of the company from 06/08/2007 to 08/08/2007 it was noticed that the assessee was availing wrongly exemption of service tax under Notification No. 4/2004-ST dated 31/03/2004 for the CHA services rendered outside the unit situated at Special Economic Zone, Chennai. It is further noticed that the assessee had made late payment of service tax for the month of October & November 2006 and January & March 2007 but did not pay the interest thereon. It was further found that the assessee has been rendering CHA service Air and Sea freight Agency service (business auxillary service) pertaining to the import of cargo to M/s. Nokia India Pvt Ltd., a unit situated at in the Special Economic Zone in Sriperumpudur, Chennai and the assessee had not paid service tax on the above charges claiming the benefit under Notification No. 4/2004-ST dated 31/03/2004. It was further noticed that the assessee had rendered such services during the period from 01/12/2005 to 31/07/2007 for a consideration of Rs. 17.43 crores approximately and the service tax payable on the same works out to Rs. 2,07,42,984/-. Accordingly, a show-cause notice dated 23/04/2008 was issued to the assessee demanding service tax of Rs. 2,07,44,984/- ad Rs. 2,56,896/- in respect of the services rendered to the airlines for which they received a consideration along with interest thereon at appropriate rates. The notice also proposed penalties under Section 76 & 78 of the Finance Act, 1994. The case was adjudicated and the above demands were confirmed along with interest thereon. A penalty was also imposed on the assessee for an equivalent amount under Section 78 of the Finance Act for suppression and wilfull mis-statements of facts with an intent to evade tax apart from penalty under Section 76 for non-payment of service tax. Hence, the appellant is before us.
3. Sri. Harsh Shah, Senior Manager of the appellant firm submits that during the impugned period, the services provided to a SEZ developer or to a unit in the SEZ by any service provider was exempt under Notification No. 4/2004-ST dated 31/03/2004 and, therefore, they are eligible for the said exemption. He further referred to Section 26 of the Special Economic Zone Act, 2005 and rule 31 of the SEZ Ruled, 2006, wherein it is stated that every developer and the entrepreneur shall be entitled to exemption from service tax under Chapter V of the Finance Act, 1994 on taxable services provided to a developer or a unit to carry on the authorized operations in a Special Economic Zone. Accordingly, he argued that Notification No. 4/2004-ST has to be read along with Section 26 of the SEZ Act, 2005 and the rules made thereunder and therefore, the appellant is rightly entitled for the service tax exemption. He also relied on the judgments of the Tribunal in the case of Norasia Container Lines v. CCE [2012] 21 taxmann.com 370 (New Delhi – CESTAT) and Maersk India Ltd. v. CST [2012] 21 taxmann.com 279 (Chennai – CESTAT) and the judgement of the High Court of Delhi in the case of CIT v. Jindal Stainless Ltd., [2011] 337 ITR 495/[2012] 20 taxmann.com 531. In the light of these submissions, it is contended that the appellant is not liable to pay any service tax and the demand of service tax is not sustainable in law. Consequently the penal provisions also do not apply. Accordingly he prays for complete waiver of pre-deposit of the dues adjudged.
4. The Ld, AR appearing for the revenue on the other hand submits that exemption under Notification no. 4/2004-ST is a conditional exemption and is available only in respect of the services provided by a service provider for consumption of services within such Special Economic Zone. In the instant case the services of CHA, C&F agent, Business auxillary services, etc. have not been consumed within the Special Economic Zone and, therefore, the benefit of the said exemption will not apply. The Ld. AR also relies on the judgement of the Tribunal in the case of Sobha Developers Ltd. v. CCE [2011] 33 STT 13/13 taxmann.com 84 (Bang. – CESTAT) (Mag.) wherein while deciding the eligibility of cenvat credit under the CENVAT Credit Rules, it was held that the provisions of SEZ Act has no relevance. On the same analogy in the instant case also the appellant will not be eligible for the benefit under Notification No. 4/2004-ST and prayus for putting the appellant to terms.
5. We have carefully considered the rival submissions.
5.1 Notification No. 4/2004-ST, effective from 31-3-2004, issued under section 93 of the Finance Act, 1994, exempts taxable services provided to developer of a Special Economic Zone or a unit in the Special Economic Zone by any service provider for consumption of service within such Special Economic Zone. The argument of the appellant that the notification has to b e read along with Special Economic Zone Act, 2005 and the Special Economic Zones Rules, 2006 is devoid of merits for the reason that the latter enactments came much later, more than one year after the issue of notification No. 4/2004-ST dated 31/03/2004.
5.2 Any exemption notification has to be interpreted based on the language used therein. The Supreme Court in the case of Hemraj Gordhandas v. H.H. Dave, Asst. Collector of Central Excise & Customs [1978 (2) ELT J 350 (SC)] = (2002-TIOL-351-SC-CX) laid down the principle as follows:-
“It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. If the tax payer is within the plain terms of the exemption it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority”.
The principle relating to interpretation of notification was again considered and enunciated by the hon’ble apex Court in the case of Mangalore Chemicals & Fertilizers Ltd., v. Dy. Commissioner of Commercial Taxes [1991] (55) ELT 437 (SC) wherein the apex Court held as follows:-
“It appears to us the true rule of construction of a provision as to exemption is the one sated by this Court in Union of India v. Wood Papers Ltd., (1991 JT (1) 151 at 155)”…..Truly, speaking liberal and strict construction of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in the nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction…”
Again in the case of Bombay Chemical (P.) Ltd. v. Collector of Central Excise [1995] (77) ELT 3 (SC), the hon’ble apex Court inter-alia held as follows:
“One of settled principled of construction of an exemption notification is that it should be construed strictly, but once a goods is found to satisfy the test by which it falls in the exemption notification then it cannot be excluded from it by construing such notification narrowly”.
In the Sarabhai M. Chemicals v. CCE 2005 (179) ELT 3 (SC) a three judge bench of the hon’ble apex Court held as follows:-
“It is well settled that an exemption notification has to be strictly interpreted. The conditions for taking the benefit of the exemption have to be strictly interpreted.”
The same was re-iterated by the hon’ble apex Court in the case of Gujarat State Fertilizers CO. v. Collector of Central Excise 1997 (91) ELT 3 wherein it was held that-
“an exemption notification has to be interpreted by taking into consideration , the language of the notification which has to be given its due effect. Supposed object and purpose of the exemption has to be culled out from the said language.”
5.3 If one applies the ratio of these judgments to the facts of the present case, then the exemption is available only in respect of services provided for consumption within the Special Economic Zone. In other words, the exemption will not be available if the services are consumed elsewhere than in the Special Economic Zone.
5.4 The canon of interpretation ” Expressio unius est exclusio alterius” applies in this case. This canon implies that “the express mention of one thing excludes all others”. The explicit mention in the notification is “services provided for consumption within such Special Economic Zone”. This means services consumed outside such zone will not be entitled for the benefit of exemption.
5.5 Reliance placed by the appellant in the Norasia Container Liners case, Maersk India Ltd. case or Jindal Stainless Ltd, Case does not help when one applies the principles of statutory interpretation laid down by the hon’ble apex court. The law laid down by the hon’ble apex court is binding on all. Further, this Tribunal in the case of Shobha Developers Ltd., in a similar situation held that the provisions of Special Economic Zone Act, 2005 or the Rules made thereunder cannot be said to have any application while considering the eligibility to Cenvat Credit under the Cenvat Credit Rules, 2004.
5.6 The hon’ble High Court of Gujarat in the case of Essar Steel Ltd. v. Union of India 2008 (232) ELT 617 considered a question as to whether export duty under the Customs Act could be levied on supplies made from the DTA to a unit in the SEZ, taking into account the provisions of Section 2 (m) (ii) of the Special Economic Zone Act, 2005, read with section 51 ibid which defines the words export, import and domestic tariff area. The hon’ble High Court held that the provisions of Special Economic Zone Act, 2005 cannot be automatically be extended to other Acts such as Customs Act and prima facie in the absence of specific provision under Special economic Zone Act to levy Customs duty, no liability to pay Customs duty on goods supplies from DTA to Special Economic Zone would rise. The said decision of the hon’ble Gujarat High Court was upheld by the hon’ble apex Court reported in 2010 (255) ELT A115.
5.7 Applying the ratio of these judgments to the facts of the present case, it can be inferred that notification No. 4/2004-ST being a conditional exemption notification issued under Section 93 of the Finance Act, 1994, cannot be interpreted on the basis of the provisions of SEZ Act, 2005 or the Rules made thereunder and the conditions specified therein have to be fully satisfied for availing the benefit under the said notification.
5.8 Further, as observed earlier, the notification came into force much before the Special Economics Zone Act or the Rules made there under came into force. If the intention of the legislature was to align the exemption with section 26 of the SEZ Act or Rule 31 of the SEZ Rules, then notification No. 4/2004-ST would have been amended to reflect the same. No such amendment has been carried out in the said notification. In these circumstances, we are of the view that if the services are not consumed within the Special Economic zone, then the benefit of notification No. 4/2004-ST will not be available.
5.9 The appellant has not pleaded any financial hardship in their stay application. The hon’ble High Court of Andhra Pradesh in SQL Star International Ltd. v. Commissioner of Customs 2012 (276) ELT 465 (A.P.) held that stay cannot be granted merely on prima facie case being shown. Balance of convenience and prejudice to interest of public revenue needs to be taken into consideration while granting stay. In the instant case not only that the appellant has not made out a prima facie case but also the balance of convenience and interest of revenue demand that the appellant be put to terms.
6. In the light of the foregoing, we are of the view that the appellant has not made out any case for full waiver of the pre-deposit of dues adjudged. Accordingly, we direct the appellant to make a pre-deposit of Rs. 1.00 Crore within a period of eight weeks and report compliance on 20.8.2012. Subject to such compliance, pre-deposit of balance of dues adjudged shall stand waived and recovery thereof stayed during the pendency of the appeal.
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