2024 (12) TMI 86 - HC - Service Tax

Levy of service tax on the Shot Gun Manufacturers including the petitioners-firms herein at the rate of 12.36% - stand of the respondents is that the petitioners-firms are required to pay the service tax at the rate of 12.36% under the category Technical Testing and Analysis Service and the same has been made applicable with effect from 01.07.2003 - the stand of the petitioners is that they are licensed manufacturers of guns, their units are located in Jammu and the promoters of the petitioners are also permanent residents of J K - HELD THAT -Though the learned counsel for respondents have not disputed the provisions of Section 64 (Chapter V) of the Finance Act, 1994 excluding the applicability of the service tax to the State of J K, yet their argument is that in terms of Rule 4 of the Place of Provisions of Services Rules, 2012, the place where the services are actually performed, the service tax is leviable to justify the demand of service tax, as proof testing analysis and certification facilities are being provided by the respondents from outside the geographical boundaries of the State of J K. Further, the Central Board of Excise and Customs, Ministry of Finance, Department of Revenue has given the clarification that the service tax is destination based consumption tax and the principle of consumption of services would determine the liability of the service tax. In view of the ratio already laid down by this Court and considering the nature of work attended to by the petitioners-firms, it is found that there can be no service tax liability on the charges to be paid by the petitioners herein. Hence, there is no question of interest payable by them. The impugned Communication No. T 1000 dated 13.11.2009 in OWP No. 145/2010; impugned Communication No.KH/6519/GEN/V/102 dated 30.06.2009 in OWP Nos. 963/2009, 966/2009 and 1400/2009 as well as impugned Communication No. T 1000 dated 27.07.2010 in OWP No. 955/2010 issued by respondent No. 2 in these petitions are hereby quashed thereby directing the respondents not to levy/charge or recover service tax from the petitioners-firms towards testing fee paid to respondent No. 2 in these petitions - Petition allowed.

Summary

Issues:
Challenge to imposition of service tax on shot gun manufacturers at 12.36%.

Analysis:
The judgment addresses multiple petitions challenging the imposition of service tax on shot gun manufacturers at a rate of 12.36%. The petitioners, firms engaged in manufacturing arms and ammunition, argued that the burden of service tax was wrongly shifted onto them by the respondent. They contended that as per the Central Excise Law Manual, service tax was not applicable in the State of Jammu & Kashmir. The respondents, on the other hand, argued that service tax is an indirect tax applicable to all notified services and justified the imposition based on the provision of technical testing and analysis services provided outside the geographical boundaries of Jammu & Kashmir.

The court examined the contentions of both parties, considering the applicability of service tax under the Finance Act, 1994 to the State of Jammu & Kashmir. The respondents argued that as per the Place of Provisions of Services Rules, 2012, service tax is leviable based on where the services are performed, which in this case was outside Jammu & Kashmir. They also cited the principle of destination-based consumption tax to determine service tax liability.

The judgment referred to a previous decision by a Coordinate Bench of the Court in a similar matter, where it was held that activities performed by sovereign/public authorities under statutory requirements do not constitute taxable services. The court relied on this precedent and ruled that no service tax liability existed for the petitioners, who were engaged in activities mandated by statutory requirements for public safety. Therefore, the court allowed the petitions, quashing the impugned communications and directing the respondents not to levy or recover service tax from the petitioners for testing fees paid.

In conclusion, the judgment provides a detailed analysis of the legal arguments presented by both parties regarding the imposition of service tax on shot gun manufacturers. It emphasizes the application of statutory requirements and precedent in determining the service tax liability, ultimately ruling in favor of the petitioners based on the nature of their activities and the statutory framework governing the services provided.