The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside a service tax demand on a rent-a-cab operator that transported staff of a Special Economic Zone (SEZ).
The bench of P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) held that the authorities could not deny the exemption merely because the pick-up and drop journeys were not carried out entirely within the SEZ, particularly when Form A-1 identified rent-a-cab service as an authorised service.
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During scrutiny of the operator’s ST-3 returns for April 2011 to March 2012, the department noticed that it had reported ₹34,41,172 as receipts towards exempted services. The department sought a clarification but received no response.
The adjudicating authority proceeded ex parte. It concluded that the rent-a-cab service was performed outside the SEZ and was not consumed within it. On that basis, it denied the exemption claimed under Notification No. 4/2004 dated 31 March 2004, confirmed a service tax demand with interest under Section 75 of the Finance Act, 1994, and imposed penalties under Sections 76 and 77. The first appellate authority upheld the decision.
The appellant did not appear before CESTAT despite service of notice and multiple opportunities. The Tribunal therefore decided the appeal on the available record after hearing the department’s representative.
CESTAT noted that Form A-1, issued by the SEZ Specified Officer, named the operator as a provider of rent-a-cab service. According to the Tribunal, there was no dispute that the service was identified in the form as an authorised service.
The department maintained that the service had not been provided within the SEZ. The Tribunal found that it had produced no documentary evidence to support denial on that ground, while the first appellate authority had overlooked Form A-1.
The adjudicating authority had itself acknowledged that the operator provided pick-up and drop services for SEZ staff. CESTAT rejected the reasoning that those journeys could qualify only if the service was used wholly within the SEZ. Such an interpretation, it observed, would defeat the purpose of a cab service used to transport staff.
The Bench also referred to its decision in PRR Travels v. Commissioner of GST & Central Excise, Chennai, dated 5 December 2025. In that case, a coordinate Bench held that, for services supplied to an SEZ developer or unit for authorised operations, the place where part of the service is performed does not by itself determine eligibility for exemption. It had relied on Sections 26 and 51 of the SEZ Act.
Applying that reasoning and the Form A-1 on record, CESTAT held that the lower authorities had erred in denying the exemption. It set aside the appellate order and allowed assessee’s appeal, with consequential benefits, if any, as per law. The order does not separately quantify the service tax demand.
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