2010 (10) TMI 374 - AT - Service Tax

Exemption - Small scale service provider - As per Notification No. 6/2005-S.T., dated 1-3-2005 the assessee have an option either to avail of exemption or pay tax,and by registration and payment of service tax - the assessees had exercised their option to pay tax - Such option, once exercised in a financial year, shall not be withdrawn during the remaining part of such financial year - The plea of the assessee that it was due to wrong advice that they chose to register and pay service tax does not alter the factual position of having opted to pay tax and hence not opted for availing the benefit of notification - Hence, impugned order denying the benefit of the notification and confirming demand is sustainable.

Summary

Issues:
1. Disallowance of exemption from service tax under Notification No. 6/2005-S.T.
2. Interpretation of clause 2(i) regarding the option to avail exemption or pay tax.
3. Applicability of exemption once the option to pay tax is exercised in a financial year.

Analysis:
1. The judgment deals with the disallowance of the benefit of exemption from payment of service tax under Notification No. 6/2005-S.T. The issue arose as the assessees had registered and paid service tax, leading to the contention that they had opted to pay tax and not avail the exemption. The Tribunal held that by exercising the option to pay tax, the assessees could not later avail the benefit of exemption during the remaining part of the financial year.

2. The interpretation of clause 2(i) of the notification was crucial in this case. The clause states that the provider of taxable service has the option not to avail the exemption and pay service tax, and once this option is exercised in a financial year, it cannot be withdrawn during the remaining part of that year. The Tribunal emphasized that even if the assessees claimed they were misled into registering and paying tax, the factual position of having chosen to pay tax remained unchanged.

3. Considering the above interpretation and the specific language of the notification, the Tribunal found no grounds to interfere with the order denying the benefit of the notification. Consequently, the demand for service tax, interest, and penalty amounting to Rs. 25,848 was confirmed. The appeal was rejected based on the understanding that once the option to pay tax is exercised in a financial year, the assessees are bound by that choice for the remaining part of the year.

In conclusion, the judgment underscores the importance of understanding and adhering to the provisions of notifications related to service tax exemptions, particularly regarding the irrevocability of the choice to pay tax once exercised in a financial year.