2006 (12) TMI 200 - HC - Service Tax

Exemption notification no. 1/2006 ST dated 1.3.2006 Discrimination construction service issue of cenvat credit while availing abatement under notification no. 1/2006 Held that - In a notification of this nature, if the person is put to election that either he can opt for Cenvat credit of duty on service-tax input services or to avail benefit under the present notification which is an option which is extended to a person which he can seek for, avail of or ignore, no grievance can be made that putting a person to such option is bad. The notification has never the effect of either enhancing the tax liability of the petitioner nor does it per se discriminate against the petitioner as a concession which is subject to a condition as under the present notification, in the sense that, a person claiming benefit under one particular provision is not entitled for benefit under the other, cannot be said to be a discriminatory provision. The exemption notification always come subject to the condition to which the exemption is granted and there is no question of Courts dissecting the notification of this nature to extend the benefit but not to insist compliance of the condition for a particular assessee. It is for the legislature to take care of what class of persons certain benefits are extended and in what manner, etc.

Summary

Issues:
Challenge to exemption notification under the Finance Act, 1994 regarding construction of complexes and the condition of availing Cenvat credit.

Analysis:
The petitioner, an assessee liable to tax under the Finance Act 32 of 1994, is involved in the construction of complexes, which is subjected to a 5% tax on the value of services provided. The petitioner challenged the exemption Notification No. 1 of 2006, which extends concessions to service providers, including those in construction activities, but with a condition. The condition stated that the notification does not apply if the assessee has availed Cenvat credit on inputs or services. The petitioner argued that this condition unfairly excludes those who have availed of Cenvat credit, making the notification ineffective for them.

The respondents contended that the condition imposed in the notification is within the powers of the Central Government under section 93 of the Act. They argued that the earlier, more beneficial Notification No. 18 of 2005 had been superseded by the current notification, which explicitly denies benefits to those availing Cenvat credit. The respondents stated that the principle of promissory estoppel cannot be invoked in taxation matters, especially in exemption notifications under the Act, which are considered delegated legislation.

The petitioner's counsel argued that the current notification, replacing the earlier beneficial one, discriminates against those who have availed Cenvat credit. They claimed that the petitioner is being deprived of benefits under the new notification, which is not fair. The Court noted that the notification under scrutiny was issued under section 93 of the Finance Act, granting concessions to specific service providers subject to conditions specified in the notification.

The Court further explained that the notification allows for a different method of determining tax liability, with the concession applying only if the liability calculated under the notification is less than the actual liability under the Act. The Court emphasized that the option given to the assessee to choose between Cenvat credit and the notification's benefits is a valid provision and does not amount to discrimination.

Ultimately, the Court held that there was no discrimination or grounds for quashing the notification. The Court emphasized that exemption notifications come with conditions, and it is not for the Courts to dissect or alter the conditions set by the legislature. The petitioner was granted the liberty to explore other available remedies under statutory provisions while dismissing the writ petition.