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TMI BlogTAX ABATEMENT IN SERVICE TAX - Part – IX X X X Extracts X X X X X X X X Extracts X X X X ..... TAX ABATEMENT IN SERVICE TAX - Part – I X X X X Extracts X X X X X X X X Extracts X X X X ..... l the claims. One who abates is called abator. Conditions of abatement and judicial pronouncements For the purpose of claiming or availing the benefit of abatement, it is necessary for the assessee to comply with the conditions of abatement. The abatement notification stipulates various conditions, particularly in reference to Cenvat credit for availing the abatement. It may be noted that if such conditions are not satisfied, the Department may deny the benefit of abatement. To this extent, the prescribed abatements differ from exemptions. The following pronouncements may be referred in this regard - It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the party is not entitled to the benefit of that notification. The rule regarding exemptions is that exemptions should generally be strictly interpreted but beneficial exemptions having their purpose as encouragement or promotion of certain activities should be liberally interpreted. This composite rule is not stated in any particular judgment in so many words. In fact, majority of judgments emphasize that exemptions are to be strictly interpreted while some of them insist that exemptions in fiscal Statutes are to be liberally interpreted giving an apparent impression that they are contradictory to each other. But this is only apparent. A close scrutiny will reveal that there is no real contradiction amongst the judgments at all. The sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nthesis of the views is quite clearly that the general rule is strict interpretation while special rule in the case of beneficial and promotional exemption is liberal interpretation. The two go very well with each other because they relate to two different sets of circumstances. [Commissioner of Customs (Prev.) Mumbai v. M. Ambalal & Co. 2010 (12) TMI 16 - Supreme court of India]. It is also a settled law that the meaning of any term in a taxing statute cannot be understood with reference to even similar term used in the different taxing statute. It is essentially to be understood in the context it is used in the very section where the term is found to have been used. Being so, even while understanding the term in the notification which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issued under a taxing statute, the meaning of the term thereunder cannot be understood with reference to the similar term used in a different statute, unrelated to the notification. [CCE, Jammu v. Jindal Drugs Ltd. 2009 (8) TMI 812 - CESTAT, NEW DELHI]. Exemption notification is to be strictly construed and conditions thereof strictly interpreted. Since exemption notifications are issued under delegated legislative power, they have full statutory force. A party claiming exemption has to prove that he/it is eligible for exemption contained in the notification. An exemption notification has to be strictly construed. The conditions for taking benefit under the notification are also to be strictly interpreted. When the wordings of notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is clear, then the plain language of the notification must be given effect to. By way of an interpretation or construction, the Court cannot add or substitute any word while construing the notification either to grant or deny exemption. The Courts are also not expected to stretch the words of notification or add or subtract words in order to grant or deny the benefit of exemption notification. In Bombay Chemicals (P) Ltd. v. CCE - 1995 (4) TMI 59 - SUPREME COURT OF INDIA, a three Judge Bench of this Court held that an exemption notification should be construed strictly, but once an article is found to satisfy the test by which it falls in the notification, then it cannot be excluded from it by construing such notification narrowly. [Sara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... swati Sugar Mills v. CCE, Delhi - III (2011 (8) TMI 4 - SUPREME COURT OF INDIA] It is well settled principle of understanding and interpreting taxing provisions, particularly the exemption provision found in a taxing statute, which is an exception that any exemption is to be express and there is no exemption by implication or by a logical deduction. Even in respect of an exemption matter, the exemption is as conferred by statute and not either as is sought to be given by courts or as is understood by courts by way of a deduction or by way of extension to similar situations. An exemption is only in respect of those circumstances and persons or groups who are specifically mentioned for the exemption and not by way of extension of similar sit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uations or similarly placed persons or even similar goods. [Commissioner of Customs, Bangalore v. Leela Scottish Lace Ltd. 2011 (2) TMI 680 - KARNATAKA HIGH COURT] In State of Gujarat v. Essar Oil Ltd. 2012 (1) TMI 47 - SUPREME COURT OF INDIA, it was held that the principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee, does not apply to the construction of an exception or an exempting provision, as the same has to be construed strictly. Further, a person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision and in case of doubt or ambiguity, benefit of it must go to the State. taxmanagementindia.com In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Customs (Preventive), Gujarat v. Reliance Petroleum Ltd 2008 (5) TMI 13 - SUPREME COURT, it was held that interpretation of an exemption notification depends upon its nature and extent. Terminology used in the notification has an important role to play. Where exemption notification exfacie apples, there is no reason as to why the purport thereof would be limited by giving a strict construction thereto. A contextual meaning to the entries, keeping in view the nature of exemption sought to be granted by reason of the notification, must be assigned. The purpose for which the exemption was granted must be considered in its entirety - the purpose of exemption cannot be lost sight of. Abatement Notification In terms of the Noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication No. 26/2012-ST, exemption is granted from so much of the service tax leviable, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (3) of the following Table, of the amount charged (or in some cases of specified amount) by such service provider for providing the said taxable service, unless specified otherwise, subject to the relevant conditions specified in the corresponding entry in column (4) of the Table: Sl.No. Description of taxable service % Conditions (1) (2) (3) (4) 1 Services in relation to financial leasing including hire purchase 10 Nil 2 Transport of goods by rail 30 Nil 3 Transport of passengers, with or without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accompanied belongings by rail 30 Nil 4 Bundled service by way of supply of food or any other article of human consumption or any drink, in a premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organizing a function) together with renting of such premises 70 CENVAT credit on any goods classifiable under chapter 1 to 22 of the Central Excise Tariff Act, 1985 (5 of 1986) has not been taken under the provisions of the CENVAT Credit Rules, 2004. 5 Transport of passengers by air, with or without accompanied belongings 40 CENVAT credit on inputs and capital goods,used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes 60 CENVAT credit on inputs and capital goods,used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. 7 Services of goods transport agency in relation to transportation of goods. 25 CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. 8 Services provided in relation to chit 70 CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rules, 2004. 9 Renting of any motor vehicle designed to carry passengers 40 CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. 10 Transport of goods in a vessel 50 CENVAT credit on inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of the CENVAT Credit Rules, 2004. Abatements allowed prior to 1.7.2012 Following table lists out the abatements available to assessees prior to 1st July 2012 under Notification No. 1/2006-ST dated 1.6.2006 (since rescinded w.e.f. 1.7.2012). S.No. Taxable Services Clause of section 65 (105) Tax payable @ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % 1 Mandap keeper services (m) 60 2 Tour operator services (n) 25/40/10 3. Renting a cab (o), (zn), (zzl) or (zzm) 40 4. Convention with catering services (zc) 60 4A Chit services (zm) 70 4A Business auxiliary services (specified production or processing) (zzb) 70 5 Erection, commissioning or installation under a contract in relation to plant, machinery, equipment or structures (zzd),(zn),(zzl) or (zzm) 33 6 Transport of goods by road (zzp) 25 7 Commercial or industrial construction services (zzq), (zn), (zzl) or (zzm) 33 7A Commercial or industrial construction (zzq), (zn), (zzl) or (zzm) 25 8 Outdoor catering (zzt) 50 9 Pandal or shamiama including catering services (zzw) 70 10 Constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of complex (zzzh), (zn), (zzl) or (zzm) 33 10A Construction of complex (including land) (zzzh), (zn), (zzl) or (zzm) 25 11 Transport of goods by rail (zzzp), (zn), (zzl) or (zzm) 30 12 Transport of (costal goods; goods through national waterway ; or goods in through inland water (zzzzl) 75 13 Restaurant services (zzzzv) 30 14 Services provided hotel, inn, guest house, club or campsite, (zzzzw) 50 Such abatements were not allowed in the following conditions - (i) the cenvat credit of duty on inputs or capital goods or the cenvat credit of service tax on input services, used for providing such taxable service, has been taken under the provisions of the CENVAT Credit Rules, 2004; or (ii) the service provider has ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled the benefit under the Notification No. 12/2003-Service Tax, dated the 20th June, 2003 (To be continued ……) = = = = = = = = = = Reply By ANAND SHEMBEKAR as = An excellant article on abatement in service tax, only thing which is required whether service provider like accomodation services , bundles services , transport of pasangers by air , the taxable portion is 60% , 70% , 40% respectively, they can avail the cenvat credit on Input services like telecommunication, Contract labour , repairs and maintenance etc., in such cases whether such providers are required to reverse the cenvat credit on input services @ 6% of exempted value. For e.g. GTO of guest house during the month say November 2012 is Rs. 15 Lakhs and he is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collecting the service tax after abatement of 40% , and also availed input tax credit of security , telephone , repairs to guest house say Rs. 1 Lakhs , in this case whether service provider has to reverse the cenvat credit on exempted value of services of Rs. 6 Lakhs ( Rs. 15 Lakhs x 40% ) ?
Dated: 11-2-2013 X X X X Extracts X X X X X X X X Extracts X X X X
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