2010 (9) TMI 404 - AT - Service Tax

Refund - Small Service Provider exemption - notification no. 6/2005 - lower authorities denied the refund claim holding that the appellant has not fulfilled the conditions of the Notification and hence is not entitled - condition laid down in the Notification is that nowhere during the financial year he can opt for exemption if once he has not opted for exemption in advance - appellant had done only one transaction of receiving commission and it is also a fact that no service tax has been received by the appellant - appellant has not received the service tax, but being an honest tax payer, he opted to pay service tax on the commission received by him and applied for service tax registration and, therefore, he paid the service tax - no question to opt to go out of exemption limit as per the said Notification - condition 2(1) of the said Notification is not applicable to the facts and circumstances of this case - order set aside and the refund claim allowed

Summary

Issues:
Appeal against denial of exemption under Notification No. 6/2005-S.T., dated 1-3-2005 as amended.

Analysis:
The appellant filed a refund claim under Section 11-B of the Central Excise Act, 1944, seeking a refund of excess service tax paid. The appellant received a commission of Rs. 20 lakhs but did not receive any service tax initially. Subsequently, the appellant applied for registration and paid service tax on the commission without deducting the basic exemption of Rs. 8 lakhs. The refund claim was rejected on the grounds that the appellant did not opt for the exemption under Notification No. 6/2005-S.T. The appellant contended that the Notification provides an option to avail exemption subject to fulfilling specified conditions. The appellant's written submissions were considered, while the respondent argued that the appellant did not opt for the exemption and hence the refund claim was rightly rejected. The appellant's case was compared to a previous judgment to support the respondent's contention.

The appellant received a commission of Rs. 20 lakhs and got registered with the Service Tax Department as a real estate agent. The appellant paid service tax on the commission but did not claim the basic exemption of Rs. 8 lakhs as per the Notification. The lower authorities denied the refund claim stating that the appellant did not fulfill the conditions of the Notification. The Notification specified that the provider of taxable service has the option to not avail the exemption and pay service tax, with the condition that once the option is exercised in a financial year, it cannot be withdrawn. The appellant, being a new assessee, paid the service tax without opting for the exemption in advance. The condition specified in the Notification was deemed not applicable to the appellant's case, distinguishing it from the case law cited by the respondent.

The appellant, as an honest taxpayer, paid service tax on the commission received despite not receiving any service tax initially. The appellant's situation of only one transaction and lack of prior knowledge regarding the exemption threshold led to the conclusion that the condition of the Notification regarding opting for exemption in advance did not apply. Consequently, the impugned order was set aside, and the refund claim was allowed.