By Puloma Dalal, Jayesh Gogri, Mandar Telang, Chartered Accountants
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Transactions between SEZ unit and DTA unit of the same entity are not leviable to service tax.
Facts:
The appellant set up 2 units viz. in an SEZ and in DTA. The SEZ unit also provided certain in-house work to DTA units. The respondents demanded service tax on the said transactions between SEZ and DTA units considering them as separate legal entities on the grounds that both the units were separately registered with the service tax department, raised invoices and fell under the definition of ‘persons’ as per the SEZ Act. The appellants contested that in the present case there was absence of two parties for the provision of taxable service by one person to another and also that the SEZ Act had no relevance for interpretation of the service tax law. Further, invoices were issued to satisfy SEZ law and internal monitoring purposes only. Also, SEZ Units never received any amount from DTA units as the same were interunit entries in books of accounts which were not taxable transactions.
Held:
Confirming the contentions of the appellant, the Hon. Tribunal held that merely entering into agreements and raising invoices did not mean SEZs were separate legal entities. Further, the definition of ‘person’ as per the SEZ Act, which included AOP or BOI, whether incorporated or not was not applicable in the present case as the units were not shown as AOP or BOI. Further, the presence of two persons was a must to levy service tax. In the absence of any definition under service tax law, the persons were held not to be separate legal persons and the transaction between SEZ and DTA units was not liable to service tax.
