2016 (9) TMI 331 - AAR - Service Tax

Availability of exemption-Notification No. 4/2013-SC dated 1st March, 2013 proper applicant from filing application of Advance ruling - private limited company public limited company Held that - the exemption under Notification No. 4/2013-SC dated 1st March, 2013 is available to public limited company as well as private limited company. The applicant, being public limited company, is a proper applicant. Building of a single house for the customer taxability independent service bundled service - obtaining of necessary sanctions from the Gram Panchayat for being able to construct the house Held that - if there is an independent agreement only for the purposes of obtaining the necessary sanctions from the local self government including the Gram Panchayat then it would undoubtedly amount to an independent service. If it is a bundled service it will mean thereby that the company will obtain the necessary sanctions and then will build an individual house. There will be no independent agreement regarding obtaining of sanctions and if there is any, the company will pay the Service Tax over that - in case there is a common agreement of obtaining the sanction and then build an individual house, it would be covered under the exemption notification exemption available matter disposed off

Summary

Issues:
1. Entitlement of public limited company for exemption.
2. Exemption of service tax for building a single house.
3. Distinction between bundled service and separate service for obtaining necessary sanctions.

Entitlement of Public Limited Company for Exemption:
The Authority for Advance Rulings addressed the issue of whether a public limited company is entitled to exemption under Notification No. 4/2013-SC dated 1st March, 2013. The Department had objected, claiming that only private limited companies were eligible for the exemption. However, the Authority clarified that the notification allows even public companies to apply for and be entitled to the exemption. Consequently, the objection regarding the applicant's status as a public limited company was rejected.

Exemption of Service Tax for Building a Single House:
The Authority considered the activity proposed by the applicant, which involved building a single house for an individual customer. Acknowledging that this activity is exempt from Service Tax, the Authority noted an objection related to the applicant obtaining necessary sanctions from the 'Gram Panchayat' to construct the house. The contention was that obtaining such sanctions would constitute a separate service attracting Service Tax if done through an independent agreement. However, the applicant argued that it would be a bundled service, where obtaining sanctions and building the house would be covered under a common agreement. Accepting this argument, the Authority ruled that in cases where there is a common agreement for both obtaining sanctions and constructing the house, it would fall under the exemption notification, thereby exempting it from Service Tax.

Distinction Between Bundled Service and Separate Service for Obtaining Necessary Sanctions:
The Authority delved into the distinction between a bundled service and a separate service for obtaining necessary sanctions from the 'Gram Panchayat'. While acknowledging that an independent agreement solely for obtaining sanctions would attract Service Tax, the Authority accepted the applicant's assertion that it would be a bundled service, where both obtaining sanctions and building the house would be covered under a single agreement. This interpretation led the Authority to rule that in such factual scenarios, where there is a common agreement for both services, no Service Tax would be attracted, and the activity would be exempt under the notification.

In conclusion, the Authority for Advance Rulings clarified the entitlement of a public limited company for exemption, affirmed the exemption of Service Tax for building a single house, and distinguished between bundled and separate services for obtaining necessary sanctions, ultimately ruling in favor of the applicant based on the interpretation of the agreement covering both services under the exemption notification.