2024 (7) TMI 113 - AT - Service Tax

Levy of service tax - technical inspection and certification agency service - Quality Assurance Charges for testing rifles - period from 2006 07 to 2009 2010 - HELD THAT - The legal issue has been examined in detail by the Hon ble Jammu and Kashmir High Court in M/S. COMMANDANT, QA AND PROOF VERSUS C.C.E., BHOPAL 2017 (7) TMI 299 - CESTAT NEW DELHI where it was held that ' there can be no service tax liability on the charges collected by the appellant. Hence, there is no question of interest payable by them. The impugned order is set aside and the appeal is allowed.' There are no hesitation in setting aside the impugned order and allowing the appeal - appeal allowed.

Summary

Issues:
Service tax liability on quality assurance charges for testing rifles.

Analysis:
The appeal was filed against an order passed by the Commissioner of Customs and Central Excise, Trichy, demanding service tax, interest, and penalties from the appellant for not making payments towards quality assurance charges for testing rifles. The appellant argued that the charges collected were fees prescribed for conducting quality checks and were not liable to service tax. They referenced Rule 22 of The Arms Rules, 1962, stating that proof testing of firearms is a statutory requirement for public safety. The appellant relied on judgments from the Hon'ble Jammu and Kashmir High Court and a Coordinate Bench of the tribunal to support their argument. The respondent reiterated the findings of the impugned order.

The Tribunal examined the legal issue in detail, referring to the judgment of the Hon'ble Jammu and Kashmir High Court and a previous tribunal case. The High Court had ruled that activities performed by sovereign/public authorities under statutory duties, involving public safety, are not taxable services. Based on this precedent and the nature of the appellant's work, the Tribunal concluded that there was no service tax liability on the charges collected by the appellant. Consequently, the impugned order was set aside, and the appeal was allowed. The Tribunal emphasized the importance of following earlier decisions of co-equal benches, especially when based on superior court judgments. The appellant was granted consequential relief as per the law.

In conclusion, the Tribunal ruled in favor of the appellant, stating that the charges collected for testing rifles were not subject to service tax due to the nature of the activities being in the public interest and statutory in nature. The judgment highlighted the significance of judicial discipline in following precedents and granted the appellant relief accordingly.