2017 (5) TMI 1466 - HC - Service Tax

Levy of service tax in the State of Jammu and Kashmir - Whether the respondent-Department is entitled to charge service tax in relation to services said to be rendered by Gun testing conducted by Quality Assurance Establishes (SA) Kanpur for the purposes of quality assurance? Held that - in the case of M/S Bumrah Gun Works and ors vs. Union of India and ors, OWP No. 1391/2010 decided on 22.11.2016, where a batch of writ petitions on the similar claim was considered by the Division Bench of this Court and disposed of by holding that in terms of Section 64 of the FA, 1994, service tax is not applicable to the State of Jammu and Kashmir. It was also held that the quality testing of guns does not attract the service tax - petition allowed - decided in favor of appellant.

Summary

Issues:
- Whether the respondent- Department is entitled to charge service tax for gun testing services by Quality Assurance Establishes (SA) Kanpur.

Analysis:
- The petitioner challenged a communication demanding service tax for quality assurance services provided by a government establishment in Kanpur. The petitioner argued that service tax is not leviable in Jammu and Kashmir as per Section 64 of the Finance Act, 1994. The petitioner also contended that quality testing conducted by the Quality Assurance Establishes does not fall within the definition of service.

- The petitioner relied on a previous decision by the Division Bench of the Court, which held that service tax is not applicable in Jammu and Kashmir as per Section 64 of the Finance Act, 1994. The Court in the previous case also ruled that quality testing of guns does not attract service tax.

- The judgment highlighted that activities performed by sovereign/public authorities under the law are statutory duties and not considered as taxable services. The Senior Quality Assurance Officer in Kanpur conducts proof testing of firearms as a statutory requirement for public safety. The judgment referenced a circular by the Government of India clarifying that such activities are not taxable services. The Court emphasized that the testing fee paid for firearms is a statutory requirement and not subject to service tax.

- Based on the previous decision and the circular, the Court quashed the demand notices for service tax on testing fees paid to the Senior Quality Assurance Officer in Kanpur. The Court directed the respondents not to levy or recover service tax for the testing fee. The writ petitions were partly allowed without costs, setting aside the impugned demand notice dated 27th July, 2010.