2019 (11) TMI 1647 - AT - Central Excise

Restriction of CENVAT Credit to 20% - non-taxable territory - services provided in the state of Jammu Kashmir - registered office of appellant and registered office of main contractor for whom the appellants were sub-contractor are in taxable territory - Applicability of Rule 6 of the Taxation of Services (Provided from outside and received in India) Rules 2006 as well as Rule 8 of the Place of Provision of Service Rules, 2012 - HELD THAT - The provisions of Rule cannot override provisions of Section provided in the Act. There is no dispute that services were provided and consumed in the State of Jammu Kashmir - Section 64 of Finance Act, 1994 clearly lays down that provisions of Chapter V of Finance Act, 1994 which deals with service tax are not applicable in the State of Jammu Kashmir. The stand taken by Revenue is not sustainable - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Taxability of services provided and consumed in the State of Jammu & Kashmir under Rule 6 of the Taxation of Services Rules 2006 and Rule 8 of the Place of Provision of Service Rules, 2012.
2. Applicability of Section 64 of the Finance Act, 1994 in relation to service tax in the State of Jammu & Kashmir.

Issue 1: Taxability of services in Jammu & Kashmir under Rule 6 and Rule 8:
The appeals involved a common issue regarding the taxability of services provided and consumed in the State of Jammu & Kashmir by the appellants, who were sub-contractors for main contractors involved in laying tracks for Indian Railways. The Revenue contended that since the registered offices of the appellants and the main contractors were in taxable territory, the services rendered in Jammu & Kashmir were taxable under Rule 6 of the Taxation of Services Rules 2006 and Rule 8 of the Place of Provision of Service Rules, 2012. The appellant had initially faced objections regarding cenvat credit restrictions to 20% due to the mixed nature of services provided in Jammu & Kashmir. However, the Revenue later issued show cause notices demanding recovery of service tax for services in Jammu & Kashmir.

Issue 2: Applicability of Section 64 of the Finance Act, 1994:
The Tribunal analyzed the provisions of Section 64 of the Finance Act, 1994, which explicitly states that Chapter V of the Act, dealing with service tax, is not applicable in the State of Jammu & Kashmir. Considering this provision, the Tribunal held that the services provided and consumed in Jammu & Kashmir were not subject to service tax as per the Finance Act, 1994. The Tribunal emphasized that the provisions of Section prevail over the Rules cited by the Revenue, and therefore, the Revenue's stance on taxability in Jammu & Kashmir was deemed unsustainable. Consequently, the Tribunal set aside all impugned orders and allowed the appeals in favor of the appellants.

In conclusion, the judgment by the Appellate Tribunal CESTAT ALLAHABAD addressed the issues of taxability of services in Jammu & Kashmir under specific rules and the applicability of Section 64 of the Finance Act, 1994. The Tribunal ruled in favor of the appellants, emphasizing the non-applicability of service tax in Jammu & Kashmir as per the Finance Act, 1994, and overturning the Revenue's claims.