2017 (5) TMI 1390 - AT - Service Tax

SSI exemption - clubbing of clearances - whether the Court below have rightly clubbed the turnover of these two appellants for the purpose of allowing the threshold exemption or SSI exemption? - whether for the purpose of calculating SSI Exemption under the classification of Rent-a-Cab service operator where the gross receipts Form part of the aggregate value towards the taxable service or the amount as reduced by the exemption allowed vide N/N. 1/2006-ST is to be considered? Held that - the 2nd clause states such gross amount actually qualifies the words gross amount in the 1st clause. Accordingly it is evident that the gross amount prescribed the amount not including payments received towards such gross amount which are exempt from whole of the service tax leviable thereon under section 65 of the Finance Act under any other notification. Further on reading N/N. 1/2006-ST it is evident that the said notification exempts 60% of the gross receipts towards the service Renting-a-Cab as defined in sub-clause o of clause 105 of Section 65 of the Finance Act read with Section 66 of the Finance Act. Accordingly I hold for calculating that for the purpose of determining the aggregate value for exemption under N/N. 6/2005-ST only the net value received i.e. after the abatement under N/N. 1/2006-ST is to be considered. Secondly I find that there is no proposal in the SCN for clubbing the turnover of these two appellants for the purpose of threshold exemption. Accordingly I hold that the said clubbing is bad and further direct that the appellants are entitled to threshold exemption separately. The matter is remanded to the Adjudicating Authority for the limited purpose of calculating the net tax payable if any after implementing the orders and directions - appeal allowed by way of remand.

Summary

Issues:
1. Clubbing turnover for threshold exemption
2. Calculation of SSI exemption for Rent-a-Cab service

Analysis:

Issue 1: Clubbing turnover for threshold exemption
The case involved two appellants, a husband and wife, engaged in providing Rent-a-Cab Operator service. The Court below had clubbed their turnover for the purpose of allowing the threshold exemption or SSI exemption. The appellants argued that their turnover fell below the threshold exemption limit, and they were separate in their business, having separate Income Tax PAN, thus no Service Tax was payable. The Adjudicating Authority allowed the threshold exemption only for the husband and not for the wife, leading to a confirmed demand against both appellants. The Appellate Tribunal found that there was no proposal in the show-cause-notice for clubbing the turnover of the appellants for the purpose of threshold exemption. Therefore, the Tribunal held that the clubbing was improper, and the appellants were entitled to the threshold exemption separately.

Issue 2: Calculation of SSI exemption for Rent-a-Cab service
The second issue revolved around the calculation of SSI exemption for Rent-a-Cab service under Notification No.6/2005-ST. The appellants argued that only the net value received after abatement under Notification No.1/2006-ST should be considered for determining the aggregate value for exemption under Notification No.6/2005-ST. The Tribunal analyzed the definitions and provisions of the notifications and held that for the purpose of determining the aggregate value for exemption, only the net value received after abatement was to be considered. Therefore, the Tribunal directed that for calculating the net tax payable, the net value after abatement should be taken into account. The matter was remanded to the Adjudicating Authority for this purpose, and the appellants were instructed to file the calculation with the Authority along with a copy of the Tribunal's order.

In conclusion, the Appellate Tribunal allowed the appeals, set aside the impugned orders, and granted the appellants consequential benefits. The Tribunal clarified the correct method of calculating the SSI exemption for Rent-a-Cab service and directed the Adjudicating Authority to recalculate the tax payable accordingly.