2017 (9) TMI 226 - HC - Service Tax

Whether the Custom, Excise & Service Tax Appellate Tribunal is justified in confirming levy of Service Tax, interest and penalties under the Finance Act, 1994 against the appellant by covering the activities under the category of business/service irrespective of the N/N. 25/2004, dated 10-9-2004 issued by the Government of India exercising powers conferred by sub Section (1) of Section 93 of the Finance Act? Held that - the notification aforesaid has not been taken into consideration by the authorities referred above. It is also relevant to mention that under the N/N. 14/2004, the Government of India further exempted taxable services provided to a client by a commercial concern in relation to Business Auxiliary Service under various heads including procurement of goods or service which are inputs for the clients. This notification too has not been taken into consideration by the Adjudicating Authority and both the Appellate Authorities - we deem it appropriate to remit the matter to the Adjudicating Authority to examine the Service Tax liability of the petitioner-appellant afresh by taking into consideration the Notification bearing N/N. 14/2004, 25/2004 - appeal allowed by way of remand.

Summary

Issues:
Levy of Service Tax, interest, and penalties under the Finance Act, 1994 against the appellant irrespective of exemption notifications.

Analysis:
The appeal was admitted to consider the question of law regarding the justification of confirming the levy of Service Tax, interest, and penalties against the appellant, covering the activities under the category of business/service, despite the Notification No. 25/2004 issued by the Government of India. The appellant, a proprietorship concern, was providing services as a source agent for another company. The Service Tax for the period in question was imposed on the appellant, which led to a series of appeals. The main argument presented was that the authorities failed to consider the exemptions provided by the Government of India under the Finance Act, 1994. The notifications exempted taxable services provided to a client by a commercial concern in relation to Business Auxiliary Services, including procurement of goods or services that are inputs for the clients. However, both the Adjudicating Authority and the Appellate Authorities did not take these notifications into account in their decisions.

The High Court, upon reviewing the orders passed by the Adjudicating Authority, Commissioner (Appeals), and CESTAT, found that the exemption notifications were not considered by these authorities. The Court noted that the notifications exempted taxable services provided to a client by a commercial concern in relation to Business Auxiliary Services, including procurement of goods or services that are inputs for the clients. Consequently, the Court set aside the orders under challenge and directed that the CESTAT should have considered the exemption notifications while examining the appellant's appeal. The Court decided to dispose of the appeal by remitting the matter to the Adjudicating Authority for a fresh examination of the Service Tax liability of the appellant, taking into account the relevant notifications issued by the Government of India under the Finance Act, 1994.

In conclusion, the High Court emphasized the importance of considering exemption notifications issued by the Government of India when determining Service Tax liability. The Court's decision to remit the matter to the Adjudicating Authority for a fresh examination underscores the significance of properly applying the relevant provisions and notifications under the Finance Act, 1994 in such cases.