2016 (6) TMI 923 - AT - Service Tax

Taxability of Grants-in-Aid Projects (GAP) - Scientific and Technical Consultancy Services - The assesse is paying service tax in respect of activities except Grants-in-Aid Projects (GAP) - Held that - appellant appears to have a strong case on merits. The sanction of grants are seen issued for and behalf of the President of India. Certain documents show that the funds are for meeting R&D expenses. - prima facie case is in favor of assessee - Stay granted.

Summary

Issues:
1. Stay of the impugned order sought by the appellant.
2. Tax liability on amounts received by the appellant under various project categories.
3. Appellant's contentions on service tax liabilities and limitation.
4. Applicability of service tax on activities related to foreign donors.
5. Opposing arguments by the Assistant Commissioner.
6. Decision on the application for stay based on merits and limitation.

Analysis:
1. The appellant filed an application seeking a stay of the impugned order. The appellant, engaged in Research & Development activities, provides services like contract research, consultancy, and technical services. The dispute arose regarding Grants-in-Aid Projects (GAP) where the department considered the deposits received by the appellant as payments for Scientific and Technical Consultancy Services. The original authority confirmed a specific amount and imposed penalties under the Finance Act, 1994.

2. The appellant, through their consultant, argued that they are not liable for service tax in various categories of projects. For Public-Private Partnership (PPP) projects, they highlighted that the entire grant is sanctioned by the Government of India, and they rely on a circular clarifying services by public-funded research institutions. Regarding grants from foreign donations, they claimed exemption under Export Service Rules, 2005. For grants to eminent scientists, they stated they are only a medium for disbursing government amounts and not providing any service.

3. The consultant also contended that a significant part of the notice period was beyond the limitation period, as the show-cause notice was issued late. They argued that all details were publicly available, and suppression could not be alleged. The appellant cited legal precedents to support their case on merits and limitation, emphasizing the delay in issuing the show-cause notice.

4. The Assistant Commissioner opposed the application for stay, reiterating the findings in the impugned order. He argued against considering the appellant's service to foreign donors as an export of service, stating that this argument was not raised earlier. The activities of the appellant were deemed taxable based on a circular issued by the Central Board of Excise and Customs (CBEC).

5. After considering arguments from both sides and reviewing the records, the tribunal found merit in the appellant's case. The grants were issued on behalf of the President of India for R&D expenses, and the appellant's status as a Government Organization under the Council of Scientific & Industrial Research supported their contentions. Citing relevant case laws, the tribunal granted an unconditional stay of the impugned order until the appeal's disposal, based on the appellant's strong case on merits and limitation.