Principal Commissioner CGST And Central Excise Vs S.R. Traders (Supreme Court of India)
The Supreme Court considered the Revenue’s Civil Appeal against the order dated 09.05.2023 passed by the CESTAT, New Delhi, Principal Bench in Service Tax Appeal No. 54002/2018. After condoning the delay, hearing counsel for the appellant at considerable length and carefully perusing the material on record, the Supreme Court found no ground to interfere with the CESTAT order. The Civil Appeal was accordingly dismissed. The application seeking exemption from filing a certified copy of the impugned order was also allowed.
Service Tax Dispute Before CESTAT
The underlying proceedings arose from a show cause notice dated 01.03.2017 covering April 2016 to January 2017. The Department challenged the Commissioner’s order dated 30.08.2018 dropping proceedings concerning non-payment of service tax on amounts paid to the Government or a local authority as periodical charges for assignment of the right to use natural resources, including quarry sand from allotted mines.
The Commissioner had treated the agreements and predetermined payments as qualifying for the benefit contemplated by Notification No. 22/2016-Service Tax dated 13.04.2016. Before the CESTAT, however, the principal controversy was whether service tax could arise merely because payments under agreements executed before 01.04.2016 became payable after that date.
CESTAT examined Section 66D of the Finance Act, 1994. Prior to 01.04.2016, clause (a)(iv) referred to “support service” provided to business entities. From 01.04.2016, “support service” was substituted by “any service”, with the consequence noted by the Tribunal that services of the relevant nature provided to business entities became taxable from that date. The broader changes concerning services provided by Government or local authorities to business entities were therefore central to the dispute.
The Department contended that although the agreements had been executed before 01.04.2016, service tax was payable because the relevant installments or royalty payments fell due after that date. Its contention was founded on Rule 7 of the Point of Taxation Rules, 2011 and the CBEC Circular dated April 13, 2016. The Circular stated, inter alia, that service tax was payable on certain yearly installments due after 01.04.2016 and referred to Notification No. 24/2016-Service Tax and the exemption under Notification No. 25/2012-Service Tax as amended by Notification No. 22/2016-Service Tax.
CESTAT rejected the Department’s reliance on the Point of Taxation Rules for determining whether the service itself was taxable. It held that those Rules determine the date on which service tax has to be paid and do not determine whether the underlying service is taxable.
The Tribunal found the issue covered by M/s. Madhya Pradesh State Mining, Corporation Limited vs. Principal Commissioner, CGST & Central Excise, Bhopal (M.P.), where it had been held that for levy of service tax the taxable event is the point when the service is provided or agreed to be provided. In that case, the mining-right agreement had been executed on 02.01.2016, when assignment of the right to use natural resources was not taxable, and the provisions prevailing before 01.04.2016 were therefore held applicable.
Applying that reasoning, CESTAT held that agreements for assignment of mining rights executed before 01.04.2016 were governed by the service-tax position prevailing before that date and that the later timing of payments did not by itself make the underlying service taxable. It consequently found no illegality in the Commissioner’s order and dismissed the Department’s appeal.
The Revenue carried that CESTAT order to the Supreme Court. The Supreme Court did not set out an independent detailed analysis of the service-tax provisions or the CESTAT reasoning. It recorded that, after hearing the appellant and considering the material, no ground for interference was made out and dismissed the Civil Appeal. The effect of the Supreme Court order is therefore that the CESTAT order dated 09.05.2023 remains undisturbed.
Cases Discussed
- M/s. Madhya Pradesh State Mining, Corporation Limited vs. Principal Commissioner, CGST & Central Excise, Bhopal (M.P.) (CESTAT New Delhi), 2023 (4) TMI 1075-CESTAT New Delhi
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Delay condoned.
2. Having heard learned counsel appearing for the appellant at a considerable length and after carefully perusing the material available on record, we do not find any ground to interfere with the impugned Order dated 09-05-2023 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi, Principal Bench in Service Tax Appeal No. 54002/2018.
3. The Civil Appeal is, accordingly, dismissed.
4. Application seeking exemption from filing certified copy of the impugned order is allowed.
5. Delay condoned.
6. The Civil Appeal is dismissed in terms of the signed order.
