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2025 (1) TMI 847 - AT - Service TaxEffect of Notification of 2011 - retrospective or not - claim for exemption under the Notification of 2009 for the tax periods from 01.04.2008 to 31.03.2011 - Appellant ought to have resorted to the provisions of rule 6(7B) of the Service Tax Rules, 1994 or not - profit on settlement forms a part of the taxable value of services rendered by the Appellant or not - taxability of profit on the sale of foreign exchange to holders of EEFC accounts. Whether the Notification of 2011 would operate retrospectively so as to permit the Appellant s claim for exemption under the Notification of 2009 for the tax periods from 01.04.2008 to 31.03.2011? - HELD THAT - After the amendment the intention was to confirm the exemption on a wider class of persons. This is what emerges from literal linguistic reading of the amending Notification of 2011. There is no ambiguity or lack of clarity in that Notification which requires us to take recourse to any other principles of interpretation. In our opinion, no two views are possible on this point. Further, the law is well settled that except in matters of procedure, there is a presumption that law operates prospectively unless there is compelling evidence to the contrary, being, inter alia, any express statement to that effect - The intent of the Notification of 2011 is a change in the legislative policy on to whom such exemption must be granted. This change in policy cannot be lightly held to be retrospective, particularly where there are no express words in the Notification that make it retrospective. The question of whether an exemption granted operates retrospectively or prospectively is not one which requires us to choose between a liberal and a strict construction; the plain language of the Notification is perfectly clear and there is no ambiguity at all - there are no infirmity in the impugned order. Whether the Commissioner is right in finding that the Appellant ought to have resorted to the provisions of rule 6(7B) of the Service Tax Rules, 1994 and paid service tax at the rate of 0.25% on the gross amount of currency exchanged? - HELD THAT - Even if the factual findings of the Commissioner on this point are accurate, such findings are limited to a small number of transactions of the appellant. The revenue has been unable to sufficiently disprove the possibility that this variance could be otherwise justified. In any event, the occurrence of such variance is in a small number of transactions which could be on account of myriad reasons occasioned by particular circumstances. There appears to be nothing forthcoming from the Appellant s submissions to explain the reasons for these differences. The assessee is correct in submission that the option provided under Rule 6(7B) is an option available to it and not to the Revenue. Even if the Revenue was entirely correct, arguendo, in its findings of fact, the proper course of action for the Revenue would have been to determine the quantum of the hidden consideration and charge the same to tax in accordance with the provisions of section 66 and 67. These findings do not permit the Revenue to assign to itself the right to exercise the option under the aforesaid Rule. For these reasons, the contentions of the Assessee agreed in this respect and the relevant grounds of Appeal allowed. Whether the Commissioner is right in finding that the profit on settlement forms a part of the taxable value of services rendered by the Appellant? - HELD THAT - Notification No. 19/2009 granted exemption in respect of taxable service referred to in S. 65(105)(zm) or Section 65 (105) (zzk), when provided to a scheduled bank by another scheduled bank in relation to enter bank transactions of purchase and sale of foreign currency. Vijay notification 27/2011, the worlds a scheduled Bank by any other scheduled Bank came to be substituted with the words any bank, including a bank located outside India or money changer, by any other bank or money changer - the findings in the impugned order so far as this issue is concerned, is sustained. Whether the profit on the sale of foreign exchange to holders of EEFC accounts is taxable? - HELD THAT - Transaction of providing foreign currency and the transaction of repayment of proceeds are separate transactions happening at two distinct points of time and hence, the liability has been correctly fastened on the appellant. There is no flow of consideration in terms of money on these transactions since there is no conversion as such and hence, the same would not be taxable. Conclusion - i) The intent of the Notification of 2011 is a change in the legislative policy on to whom such exemption must be granted. This change in policy cannot be lightly held to be retrospective. ii) The option under Rule 6(7B) is an option available to the assessee and not to the Revenue. iii) There is no flow of consideration in terms of money on these transactions since there is no conversion as such and hence, the same would not be taxable. Appeal stands partly allowed. 1. ISSUES PRESENTED and CONSIDERED The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS Issue (a): Retrospective Application of Notification 2011
Issue (b): Application of Rule 6(7B) of the Service Tax Rules, 1994
Issue (c): Profit on Settlement as Taxable Value
Issue (d): Taxability of Profit on Sale of Foreign Exchange to EEFC Account Holders
3. SIGNIFICANT HOLDINGS
The appeal was partly allowed, with the court upholding some of the Commissioner's findings and rejecting others, as detailed above.
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