2018 (12) TMI 874 - AT - Service Tax

Refund of Service tax - Section 11B of Central Excise Act, 1944 - reverse charge mechanism - Held that - The opinion formed by original adjudicating authority while discarding the income from the nursery plant sale and the interest from bank FDs and NSCs holding the same as non taxable income is opined to be a wrong interpretation. Neither the definition of business entity nor that of turnover creates a distinction between taxable and the non taxable income. The net aggregate thereof has to be taken while calculating the turnover of the business entity. The Commissioner(Appeals) is opined to be correct while holding that the Notification does not uses the word business turnover instead has used the work business entity with turnover . Hence from the plain reading of Notification and understanding of word turnover it is clear that entire proceeds of business entity has to be considered - the findings of Commissioner (Appeals) have a legal as well as genuine basis. The Commissioner (Appeals) has rightly rejected the claim - appeal dismissed - decided against appellant.

Summary

Issues:
Refund claim of service tax under reverse charge mechanism based on turnover criteria and interpretation of turnover for legal consultancy services.

Analysis:
The case involved a refund claim of service tax filed by the appellant for legal consultancy services under reverse charge mechanism. The claim was based on the appellant's turnover being below ?10 lakhs in the preceding financial year, as per Notification No. 25/2012-ST. The Deputy Commissioner initially sanctioned the refund, but the Commissioner Central Excise later held that the refund was wrongly granted, leading to an appeal before the Commissioner (Appeals) and subsequently before the Tribunal.

The appellant argued that their turnover was below ?10 lakhs, excluding non-taxable income, and relied on a Supreme Court decision to support their interpretation of turnover. They contended that the turnover should only include activities related to taxable services, not non-taxable income like interest from bank FDs and NSCs. On the other hand, the Department argued that turnover should encompass all goods sold and services provided by the business entity, including non-taxable income.

The Tribunal analyzed the Notification criteria for refund eligibility, focusing on the definition of "business entity" and the interpretation of "turnover." While turnover was not defined in the relevant Acts, common dictionary meanings were considered, emphasizing the total revenue generated by the business entity. The Tribunal concluded that turnover should include all proceeds of the business entity, irrespective of taxable or non-taxable income, as the Notification referred to "business entity with turnover" without specifying taxable turnover. Therefore, the Commissioner (Appeals) was correct in rejecting the refund claim, as the appellant's total annual sales volume exceeded ?10 lakhs when considering all revenue sources.

In the final judgment, the Tribunal dismissed the appeal, upholding the Commissioner (Appeals)' decision to reject the refund claim based on the broader interpretation of turnover. The Tribunal's decision was based on the understanding that the Notification aimed to exempt only under-sized business entities with a turnover below ?10 lakhs, encompassing all revenue sources.