Case Law Details
Corporate Housekeeping Services (India) Private Limited Vs Commissioner of Service Tax (CESTAT Delhi)
In a landmark decision, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Delhi set aside a significant service tax demand imposed on M/s Corporate Housekeeping Services Private Limited (CHSPL). The case, involving Service Tax Appeal No. 50011 of 2017 and Service Tax Appeal No. 50274 of 2017, centered on the taxability of housekeeping services provided to international organizations, including United Nations (UN) agencies and educational institutions. The tribunal’s ruling highlights crucial aspects of service tax exemptions under Indian law, particularly concerning services rendered to international bodies.
Detailed Analysis
Case Background
M/s Corporate Housekeeping Services Private Limited, engaged in providing manpower and housekeeping services, faced a service tax demand of ₹1,30,26,548, along with interest and penalties, for the period from April 1, 2011, to March 31, 2015. This demand arose from services provided to various UN agencies such as WHO, ILO, UNESCO, FAO, and SEZ units, as well as educational institutions.
The service tax department issued multiple show cause notices over the years, questioning the non-payment of service tax on these transactions. The appellant contended that these services were exempt under Notification No. 16/2002-ST and Notification No. 25/2012-ST.
Key Arguments
1. Exemption for Services Provided to UN Agencies
The appellant argued that services provided to UN agencies like UNDP, UNICEF, and UN Women were exempt from service tax under Notification No. 16/2002-ST, which provides an exemption for services rendered to the United Nations or specified international organizations. The appellant also cited Notification No. 25/2012-ST, which continued this exemption, asserting that these organizations are integral parts of the UN system and hence qualify for the exemption.
The tribunal acknowledged that these UN agencies fall under the UN system, which grants them various privileges and immunities under Indian law. The notification clearly exempts services provided to the UN and its agencies, supporting the appellant’s claim that such services should be exempt from service tax.
2. Exemption for Services to Educational Institutions
CHSPL also argued that its cleaning and housekeeping services provided to educational institutions should be exempt from service tax under Notification No. 25/2012-ST. The tribunal concurred, noting that services provided to educational institutions are exempt from service tax, aligning with the appellant’s claim.
3. Services Rendered in Jammu and Kashmir
The appellant contended that services provided in Jammu and Kashmir should not be subject to service tax as the Finance Act, 1994 does not apply to this region. The tribunal reviewed the Place of Provision of Service Rules, 2012, and agreed that services rendered in Jammu and Kashmir were outside the purview of the Finance Act, 1994.
4. Services to SEZ Units
The appellant’s claim for exemption on services provided to Special Economic Zones (SEZs) was substantiated by the tribunal, which affirmed that SEZ units are exempt from service tax under Notification No. 17/2011-ST and Notification No. 40/2012-ST. Notification No. 17/2011-ST, effective from April 1, 2011, and Notification No. 40/2012-ST, effective from July 1, 2012, both provide a service tax exemption for services rendered to SEZ units and developers. These notifications were designed to promote export-oriented activities by eliminating service tax liabilities for services used within SEZs. The tribunal’s ruling, consistent with the exemptions outlined in these notifications, deemed the demand for service tax on these services as unjustified, validating the appellant’s exemption claim in light of these statutory provisions and reinforcing that SEZ units should benefit from such exemptions as intended by the law.
Department’s Counterarguments
The service tax department argued that many agencies mentioned by the appellant were not recognized under the UN (Privileges and Immunities) Act, 1947 and thus did not qualify for the exemption. Additionally, the department claimed that the appellant had failed to provide adequate evidence supporting their claims for exemptions, particularly concerning SEZ services and Jammu and Kashmir.
Conclusion
The CESTAT Delhi’s ruling in favor of M/s Corporate Housekeeping Services Private Limited underscores the importance of correctly interpreting and applying service tax exemptions, especially in complex scenarios involving international organizations and specialized zones. The tribunal’s decision reinforces the exemptions provided under Notification No. 16/2002-ST and Notification No. 25/2012-ST, affirming that services rendered to UN agencies and educational institutions are exempt from service tax.
FULL TEXT OF THE CESTAT DELHI ORDER
Two appeals, viz., Service Tax Appeal No. 50011 of 2017 and Service Tax Appeal No. 50274 of 2017 have been filed to assail the Order-in-Original dated 29.09.2016 wherein the Commissioner has confirmed the demand of Rs. 1,30,26,548/- along with interest and penalty. M/s Corporate Housekeeping Services Private Limited (hereinafter referred to as appellant) has filed Appeal No. 50011 of 2017 against the said confirmation of demand. The department has filed the Service Tax Appeal No. 50274 of 2017 wherein the department has agitated the issue of non-confirmation of demand and non-imposition of commensurate penalties.
2. The brief facts are as follows: M/s Corporate Housekeeping Services Private Limited, (appellant in Service Tax Appeal No. 50011 Of 2017) and (respondent in Service Tax Appeal No. 50274 Of 2017) is engaged in the activity of providing/supplying manpower and Cleaning/Housekeeping Services to various domestic organizations/companies, United Nations Organizations and International Organizations like WHO, ILO, UNESCO, FAO and SEZ units etc. The appellant/respondent have been filing Service Tax Returns regularly & discharging service tax liability under the category of ‘Manpower Recruitment or Supply Agency’s Services’. Post audit of the records of the appellant/respondent, the Department noted that the appellant/respondent were not paying service tax on the income received from services provided to international organisations. Three Show cause Notices dated 24/10/2012, 01/05/2014, 20.04.2015 and Statement of Demand dt 21.06.2016 raising service tax demand of Rs. 96.36.318/-, Rs. 45,81,112, Rs. 20,23,607/- & Rs. 36,64,452/-(Including E. Cess and H & SE. Cess) u/s 73(1) of the Finance Act, 1994 in respect of the period FY 2007-08 to FY 2011-12, 2012-13, 2013-14 and 2014-15 under Manpower Recruitment or Supply Agency Services’ along with interest and penalty. The Appellant filed the reply to the show cause notice contending that the said demand is in respect of services rendered by the Appellant to United Nations and are exempted under Notification No. 16/2002-ST dated 02.08.2002 and Notification No. 25/2012-ST dated 20.06.2012. Vide the impugned Order-In- Original No. DLISVTAX002COM0181617 dated 29.09.2016, the Commissioner confirmed the service tax demand of Rs. 1,30,26,548/- under Manpower Recruitment or Supply Agency’s Services and Cleaning/Housekeeping Services provided as per section 65(68) read with section 65(105)(k) of Chapter V of the Finance Act 1994 for the period 01.04.2011 to 31.03.2015. The Commissioner of Service Tax, Delhi-II also imposed interest under section 75 and penalty under section 76(1) of Rs. 13.02.655/-. The Commissioner refrained from imposing penalty under sections 77 & 78 of the Finance Act, 1994. Hence the present two appeals have been filed.
3. Learned Counsel appearing on behalf of the appellant-respondent submitted that the Commissioner did not consider that services rendered to United Nations Organizations viz., UN-Women, UNDP, UNFPA, UNICEF and UNODC etc are exempt from payment of service tax as these organisations are representatives of United Nations. The service tax demand against the appellant to the extent of Rs. 1,02,11,729/- in the Financial Year 2011-12 to 2014- 15 is liable to be set-aside as being exempted from service tax, being services rendered to the United Nations as per Notification No. 16/2002-ST dated 02.08.2002 and Notification No. 25/2012-ST dated 20.06.2012. 3.1 He further submitted that as per United Nations System Chart UN-Women, UNDP, UNFPA, UNICEF and UNODC etc are representatives of the six organs of the United Nations. In support of his submission, the learned counsel has relied upon the following decisions:-
- M/s AC Nielson ORG. Marg Pvt Ltd. vs COMMISSIONER of S.T., Mumbai-II reported in 2018 (12) GSTL 322 (Tri-Mumbai)
- M/s Ballset Entertainment Pvt Ltd vs CST Delhi Final Order No ST/A/58436/2017-CU(DB) dated 19/12/2017
3.2 Learned counsel further contended that the Commissioner did not consider that the appellant has also provided Cleaning and House Keeping services amounting to Rs. 2,05,81,959/- to Educational Institutes, which are exempt from payment of Service Tax vide clause (9) of Exemption Notification No. 25/2012-ST dated 20.06.2012 (w.e.f. 01.07.2012). Thus, the tax demand amounting to Rs. 2543930/- (Including E. Cess and H & SE. Cess) on the Cleaning and House Keeping services provided to Educational Institutes value of Rs. 2,05,81,959/- are exempt be liable to be set-aside.
3.3 The ld counsel also contended that the Commissioner did not consider the fact that the appellant had provided services in the State of Jammu and Kashmir, which are not covered under Finance Act, 1994 and confirmed the tax demand of Rs. 29,047/- (Including E. Cess and H & SE. Cess) and as per Section 64 of the Finance Act, 1994 service tax provisions are applicable to whole of India except the State of Jammu and Kashmir.
3.4 He further contended that the Commissioner had not considered that output service provided to SEZ units are covered under exemption notifications issued by the Central Government and confirmed the tax demand of Rs. 2,41,843/- (Including ECess and H & SE. Cess). During the period FY 2012-13 and FY 13-14, the Noticee has also provided services amounting to Rs. 19,56,655/- (FY 2012-13 Rs. 12,20,312/-and FY 2013-14 Rs. 7,36,342/- respectively) to some SEZ Units which are exempt from payment of Service Tax vide Notification No. 17/2011-ST dated 01.03.2011 and Notification No. 40/2012-ST dated 20.06.2012 (w.e.f. 01.07.2012). Therefore, in view of the exemption notification, Noticee has not charged service tax on the gross amount billed to the SEZ Units.
4. Learned Authorized Representative appearing for the Department submitted his arguments issue wise:-
Issue No. 1: Services provided to International Organisation: The appellant has claimed that services provided by them to UN-Women, UNDP, UNFPA, UNICEF and UNODC etc are representatives of United Nations. No other evidence has been provided in support of same. On comparing United Nation System Chart with the international organisation notified by the Central Government for the purpose of Section 3 of The United Nations (Privileges and Immunities) Act, 1847, he contended that many agencies shown in the United Nation chart (assumed to be representative of United Nations) are not reflecting in the list of International Organisations notified by the Central Government such as:
(i) World Health Organisation
(ii) International Labor Organisation
(iii) UN Education, Scientific and Cultural Organisation (UNESCO)
(iv) International Labor Organisation etc.
This itself shows that all agencies mentioned in said charts are not covered in the definition of United Nations and is treated as International Organisations. The ld AR submitted that the adjudicating authority had observed that the appellant had failed to provide any evidence to establish that their clients fall either under the category of ‘United Nations’ or “International Organisation”. The ld. Authorized Representative relied on the Supreme Court Judgement dated 02.08.2011 in the case of M/s Saraswati Sugar Mills vs. Commissioner of Central Excise, Delhi in Civil Appeal No. 5295 of 2003.
Issue 2: Services rendered at J&K by the noticee in accordance to the Place of Provision of Service Rules, 2012: The ld AR submitted that the appellant-respondent did not submit any evidence by way of documents, other than a single letter written by the Vice President, Administration, HDFC Standard Life Insurance.
Issue 3: Services provided to SEZ: The ld. Authorized Representative submitted that the appellant-respondent neither submitted documents while replying to show cause notices nor during personal hearing granted to them.
4.1 In view of the foregoing, the ld AR submitted that the demand confirmed against the appellant-respondent was correct.
5. As regards the departmental appeal against the impugned order, the ld AR submitted that the adjudicating authority had erred in holding that the appellant – respondent had disclosed the amount of exempt service provided under the appropriate column as the services provided by them were not exempted. He also submitted that the reliance placed on the case of M/s Pushpam Pharmaceuticals Company vs Collector of C.Ex., Bombay is misplaced as in the instant case it was recorded which revealed that they were not discharging the service tax liability on the amount received by them in lieu of providing services to international organisations. He further contended that in the self-assessment regime, the onus to correctly assess service tax liability lies on the appellant – respondent which they had failed to discharge. In addition, the learned AR submitted that the imposition of commensurate penalty under section 78 becomes imperative in the first show cause notice dated 24.10.2012 as the demand in question pertains to period beyond the normal period of limitation and as the ingredients of proviso to section 73(1) for invoking the extended period and the ingredients of equal penalty under section 78 are identical.
6. The learned counsel for the respondent submitted that for invoking the extended period, there must be collusion, wilful statement, suppression of facts or contravention of any of the provisions of the chapter of the rules with an intent to evade payment of service tax. He reiterated that the appellant respondent had filed their service tax returns regularly and had indicated the amount of income received from services provided to the organisations of the United Nations under services exempt from service tax. He relied on the ratio of several case laws in this regard:
1. CCE, Mangalore vs Shree Krishna Pipe Industries [2004(165) ELT (508)]
2. IOC vs Commissioner, Rajkot[2004(170) ELT 554(Tri. Mum)]
3. Hirakud Industrial Works vs Collector, Bhubaneshwar [2003(159) ELT 381(Tri. Del)]
4. M/s Pushpam Pharmaceuticals Company vs Collector of C.Ex., Bombay [1995(78)ELT 401(SC)]
5. Tamil Nadu Housing Board vs Collector of C.Ex, Madras [1994(74)ELT 9(SC)]
6. New Decent Footwear Ind vs Union of India [2002 (150) ELT 71(Del)]
7. Heard both the parties and perused the case records. In order to appreciate the arguments of the LD Counsel and the ld AR, we need to examine the relevant notifications, which are reproduced hereinafter for ease of reference.
“Notification no. 16/2002 -ST dated 02.08.2002
Service Tax – Services provided to United Nations or International Organisation exempted
In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), and in supersession of the notification of the Government of India, in the Ministry of Finance, Department of Revenue vide GSR 205(E), 24th April, 1998, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts all the taxable services specified in section 65 of the said Act provided by any person, to the United Nations or an International Organisation, from the whole of the service tax leviable under section 66 of the said Act.
EXPLANATION:- For the purposes of this notification, “International Organisation” means an international organisation declared by the Central Government in pursuance of section 3 of the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), to which the provisions of the Schedule to the said Act apply.
[Notification No. 16/2002-S.T., dated 2-8-2002]”
7.1 In the instant case, we find that the appellant-respondent has provided services to UNDP, UNICEF, UN Women, UN AIDS, UNODC, & UNOPS. The question before us is whether the said organisations are covered by the aforesaid notification. For the period prior to 01.07.2012, the applicable notification was Notification no. 16/2002 which exempted United Nations or International Organisation or an International Organisation, which was declared by the Central Government in pursuance of section 3 of the United Nations (Privileges and Immunities) Act, 1947. It is generally understood that United Nations is part of the UN system, which in addition to itself comprises many specialised agencies, funds, programmes, each having their own area of work, leadership and budget. We note that the six organs of the United Nation are being represented by the various Funds and Programmes/Departments and Offices/Subsidiaries/Functional and Regional Commissions and Other Entities etc. These representatives also have their offices at different locations in India. Therefore, Indian offices of these representatives of United Nations are basically part of United Nations, which are provided various privileges and immunities under Indian Laws. It is seen that the Central Government vide the aforesaid notification granted exemption from payment service tax on all the taxable services to United Nations. There is no connection between exemption provided to United Nations and International Organizations as both are independent from each other. Further, the reference to ‘The United Nations (Privileges and Immunities) Act, 1947’ in the definition of ‘Specified International Organisations’ is for limited purpose and has nothing to do with exemption provided to United Nations. In this context, we take note of the decision in M/s Ballset Entertainment Pvt Ltd., vs Commissioner of Service Tax, Delhi wherein the Tribunal vide FINAL ORDER NO. 58436/2017 dated 19.12.17 held as follows:
“5. On the second issue regarding services provided for use by the international organization UNICEF, we note the lower authorities denied the exemption under Notification 16/2002-ST on the ground that the services were provided by the appellant to M/s Lintas India (P) Ltd. and not to UNICEF. Notification 16/2002-ST exempts all taxable services provided by any person to the United Nations or an international organization as declared by the Government. UNICEF is covered by the exemption notification. We have perused various bills raised by the appellant to receive the consideration for such services. Though the bills were raised in the name of M/s Lintas India (P) Ltd., the nature of service is clearly mentioned as charges towards branding cost of three UNICEF Van, UNICEF Girl Star activities, cost of UNICEF Float Operational for 30 days, branding of Van for UNICEF. A perusal of these bills make it clear that the services are for UNICEF though the bill is raised through M/s Lintas India (P) Ltd. We find in such situation, denial of exemption under Notification 16/2002-ST will not be sustainable. Accordingly, the claim of the appellant is accepted for such exemption.
7.2 We now take up the issue of exemption under the Notification no. 25/2012-ST dated 20.06.2012, which is reproduced hereinafter for ease of reference:
“Notification no. 25/2012 -ST dated 20.06.2012
In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Act) and in supersession of notification number 12/2012- Service Tax, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 210 (E), dated the 17th March, 2012, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the following taxable services from the whole of the service tax leviable thereon under section 66B of the said Act, namely:-
1. Services provided to the United Nations or a specified international organization;
………………………………….”
As per the said notification as well, we observe that it granted similar exemption from payment service tax on all the taxable services to United Nations or a specified International Organization. As already noted supra, the six organs of the United Nations are represented by the various Funds and Programmes/Departments and Offices /Subsidiaries/ Functional and Regional Commissions and Other Entities etc, who have offices in India, making these essentially part of United Nations. These offices are provided various privileges and immunities under Indian Laws. It is seen that the Central Government vide the aforesaid notification granted exemption from payment service tax on all the taxable services to United Nations or a specified International Organization. As regards the ‘specified International Organization’ declared by the Central Government in pursuance of section 3 of the United Nations (Privileges and immunities) Act, 1947 (46 of 1947), we have already held that this clause is different from United Nations. Therefore, section 3 of the United Nations (Privileges and Immunities) Act, 1947 only talks about the other International Organisation which are separately notified by the Central Government. Further, the section 2 of the United Nations (Privileges and Immunities) Act, 1947 states:-
“2. Conferment on United Nations and its representatives and officers of certain privileges and immunities.-
(1) Notwithstanding anything to the contrary contained in any other law, the provisions set out in the Schedule to this Act of the Convention on the Privileges and Immunities, adopted by the General Assembly of the United Nations on the 13th day of February, 1946, shall have the force of law in India.
(2) The Central Government may, from time to time, by notification in the Official Gazette, amend the Schedule in conformity with any amendments, duly made and adopted, of the provisions of the said Convention set out therein.”
7.3 Therefore, section 2 of the United Nations (Privileges and Immunities) Act, 1947 provides privileges and immunities to the United Nations and its representatives and officers adopted by the General Assembly of the United Nations on the 13th day of February, 1946, wherein India is also member. There is no connection between exemption provided to United Nations and International Organizations as both are independent from each other. Further, the reference to ‘The United Nations (Privileges and Immunities) Act, 1947’ in the definition of ‘Specified International Organisations’ is for limited purpose and has nothing to do with exemption provided to United Nations. We hold that to avail exemption under the Notification No. 25/2012-ST dated 20.06.2012, one has to be either United Nations or a notified International Organization. We note that the Mega Exemption Notification No. 25/2012-ST provides exemption to United Nations and there is no condition in this notification that any organizations/agency attached or affiliated to the United Nations also requires to be notified by Central Govt. under Section 3 of the United Nations (Privileges and Immunities) Act, 1947. Hence, we hold that the exemption to United Nations is general in nature and services provided to UNDP, UNICEF, UN Women, UN AIDS, UNODC, & UNOPS is available on the basis of mega exemption Notification No. 25/2012-ST dated 20.06.2012 itself. The demand in this regard is accordingly is liable to be set aside.
8. We now take up the issue of the exemption availed by the appellant on services provided to HDFC Standard Life Insurance, based in the State of Jammu & Kashmir. We note that though the appellant has claimed the exemption, but no documentary evidence was provided by them before the adjudicating authority to corroborate their submissions. We note that it is a fact that the levy of service tax extended to the whole of India except the State of Jammu & Kashmir. However, this would be a question of fact to establish that the services were indeed provided in the non-taxable territory. Consequently, it would be appropriate that this issue be remanded to the adjudicating authority, giving opportunity to the appellant-respondent to submit corroborative evidence before the adjudicating authority in order to claim the exemption.
9. We now address the issue relating to provision of service of units in SEZ under Notification no. 40/2012-ST dated 20.06.2012. The said notification reads as follows:
“……. on being satisfied that it is necessary in the public interest so to do, hereby exempts the services on which service tax leviable under section 66B of the said Act, received by a unit located in a Special Economic Zone(hereinafter referred to as SEZ) developer of SEZ and used for the authorised operations, from the whole of the service tax, education cess and secondary and higher education cess leviable thereon.
2. The exemption contained in this notification shall be subject to the following conditions namely:-
(a) exemption shall be provided by way of refund of the service tax paid on the specified services received by a unit located in a SEZ or the developer of SEZ and used for the authorised operations:
provided that where the specified services received in SEZ and used for authorised operations are wholly consumed within the SEZ, liable to pay service tax has the option not to pay the service tax ab initio instead of the SEZ unit the developer claiming exemption by way of refund in terms of this notification.”
9.1 It has been observed by the adjudicating authority that the appellant failed to furnish any documents required to avail exemption. In this regard, we note that the detailed procedure under this notification was prescribed under Notification no. 12/2013 ST dated 01.07.2013, which is reproduced hereinafter.
Notification No. 12/2013-Service Tax
“G.S.R 448(E).–In exercise of the powers conferred by subsection (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Act) read with sub-section 3 of section 95 of Finance (No.2), Act, 2004 (23 of 2004) and subsection 3 of section 140 of the Finance Act, 2007 (22 of 2007) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 40/2012-Service Tax, dated the 20th June, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 482 (E), dated the 20th June, 2012, except as respects things done or omitted to be done before such supersession, the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the services on which service tax is leviable under section 66B of the said Act, received by a unit located in a Special Economic Zone (hereinafter referred to as SEZ Unit) or Developer of SEZ ( hereinafter referred to as the Developer) and used for the authorised operation from the whole of the service tax, education cess, and secondary and higher education cess leviable thereon.
2. The exemption shall be provided by way of refund of service tax paid on the specified services received by the SEZ Unit or the Developer and used for the authorised operations:
Provided that where the specified services received by the SEZ Unit or the Developer are used exclusively for the authorised operations, the person liable to pay service tax has the option not to pay the service tax ab initio, subject to the co3. This exemption shall be given effect to in the following manner:
(I) The SEZ Unit or the Developer shall get an approval by the Approval Committee of the list of the services as are required for the authorised operations (referred to as the ‘specified services’ elsewhere in the notification) on which the SEZ Unit or Developer wish to claim exemption from service tax.
(II) The ab-initio exemption on the specified services received by the SEZ Unit or the Developer and used exclusively for the authorised operation shall be allowed subject to the following procedure and conditions, namely:-
(a) the SEZ Unit or the Developer shall furnish a declaration in Form A-1, verified by the Specified Officer of the SEZ, along with the list of specified services in terms of condition (I);
(b) on the basis of declaration made in Form A-1, an authorisation shall be issued by the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be to the SEZ Unit or the Developer, in Form A-2;
(c) the SEZ Unit or the Developer shall provide a copy of said authorisation to the provider of specified services. On the basis of the said authorisation, the service provider shall provide the specified services to the SEZ Unit or the Developer without payment of service tax;
(d) the SEZ Unit or the Developer shall furnish to the jurisdictional Superintendent of Central Excise a quarterly statement, in Form A-3, furnishing the details of specified services received by it without payment of service tax;
…………………………………”
9.2 From the above, it is apparent that to avail the ab initio exemption, certain procedure was laid down, wherein the SEZ unit or Developer had to give a copy of the authorisation to the service provider for claiming the exemption. Therefore, as the adjudicating authority has held that no such evidence was submitted but as per assessee document are available and for this issue matter be remanded to the adjudicating authority with the directions to decide this particular issue afresh after giving opportunity to the appellant-respondent to submit corroborative evidence before the adjudicating authority, in order to claim the exemption.
10. It has also been submitted before us that the appellant-respondent had rendered housekeeping services to three educational institutions viz., IIT Patna, AIIMS Patna & The Heritage School, Gurugram during the Financial Year 2014-15. We observe that mega exemption 25/2012-ST dated 20.6.2012 provided the following exemption:
9. Service provided,-
(a) by an educational institution to its students, faculty and staff;
(b) to an educational institution, by way of,-
(i) transportation of students, faculty and staff;
(ii) catering, including any mid-day meals scheme sponsored by the Government;
(iii) security or cleaning or house-keeping services performed in such educational institution;
(iv) services relating to admission to, or conduct of examination by such institution:]
[Provided that nothing contained in clause (b) of this entry shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent;]
………………………………”
By virtue of the said exemption, we hold that the services provided to the three educational institutions by the appellant-respondent during 2014-15 is exempted under Mega exemption itself. Accordingly, the demand in this aspect is set aside.
11. We now take up the issue of dropping of demand for the extended period, along with penalty under Sections 77 & 78 of the Finance Act, 1994. We note that in the impugned order, the extended period has been dropped as the adjudicating authority has observed the following:
“… In the case, on going through the written submissions I find that the noticee has been regularly filing ST-3 return form, disclosing the amount of exempted service provided under the column. Further, there is no proof of malafide provided. I rely upon the case of M/s Pushpam Pharmaceuticals Company vs Collector of C.Ex, Bombay [1995(78) ELT 401(SC)]……………..”
11.1 It was submitted by the ld AR that the non-payment of service tax came to light during the audit of the appellant – respondent. The appellant respondent by filing their ST-3 returns had mentioned the amount received by them in the column meant for exempted services which was not as per the law as the services provided by them were taxable. Self-assessment regime placed the onus to correctly assess their service tax liability on the appellant respondent which was not fulfilled. Therefore, the penalty under section 78 was imperative. Similarly, as the appellant respondent had misdeclared the amount of taxable services, hence penalty under section 77 was leviable. On going through the show-cause notice, we find that except for stating that the show-cause notice has been issued only after conduct of audit and that the appellants have suppressed the material facts, no evidence has been put forth to show that there has been a positive act of suppression on the part of the appellant-respondent to evade payment of duty. We find that this Tribunal has been consistent in holding that extended period cannot be invoked unless a positive act on the part of the appellant is evidenced showing the intent to evade payment of duty. We find that Principal Bench of the Tribunal in the case of M/s G.D. Goenka Pvt. Ltd (2023-TIOL-782-CESTAT.DEL) held as follows:
“15. Another reason given in the SCN for invoking extended period of limitation was that the appellant had deposited the disputed amount of service tax during audit but later disputed it which shows the appellant’s intent to wilfully and deliberately suppress the facts. This reasoning of the Revenue cannot be accepted because there is nothing in the law which requires the assessee to accept the views of the audit or of the Revenue. There is nothing in the law by which an inference of intent to evade can be drawn if the assessee does not agree with the audit. It also does not matter if the assessee deposited the disputed amount as service tax during audit and later disputed it. Often, during audit or investigation, the assessee deposits some or all of the disputed amounts and later, on consideration or after seeking legal opinion, disputes the liability and seeks a notice or an adjudication order. This does not prove any intent to evade or deliberate or wilful suppression of facts.
16. Another ground for invoking extended period of limitation given in the impugned order is that the appellant was operating under self-assessment and hence had an obligation to assess service tax correctly and take only eligible CENVAT credit and if it does not do so, it amounts to suppression of facts with an intent to evade and violation of Act or Rules with an intent to evade. We do not find any force in this argument because every assessee operates under self-assessment and is required to selfassess and pay service tax and file returns. If some tax escapes assessment, section 73 provides for a SCN to be issued within the normal period of limitation. This provision will be rendered otiose if alleged incorrect self-assessment itself is held to establish wilful suppression with an intent to evade. To invoke extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed simply because the assessee is operating under self-assessment.
17. The argument that the appellant had not disclosed in its returns that it was availing and using ineligible CENVAT credit also deserves to be rejected. The appellant cannot be faulted for not disclosing anything which it is not required to disclose. Form ST-3 in which the appellant is required to file the returns does not require details of the invoices or inputs or input services on which it availed CENVAT credit and the appellant is not required to and hence did not provide the details of the CENVAT Credit taken. It also needs to be pointed out that the Returns are filed online and therefore, it is also not possible to provide any details which are not part of the returns. If the format of ST-3 Returns is deficient in design and does not seek the details which the assessing officers may require to scrutinise them, the appellant cannot be faulted because as an assessee, the appellant neither makes the Rules nor designs the format of the Returns. So long as the assessee files the returns in the formats honestly as per its self-assessment, its obligation is discharged.
18. Another ground for invoking extended period of limitation is that the appellant had not sought any clarification from the department. We find that there is neither any provision in the law nor any obligation on the assessee to seek any clarification. It was held by the High Court of Delhi in paragraph 32 of Mahanagar Telephone Nigam Ltd. vs. Union of India & Ors.6 as follows:
“32. As noted above, the impugned show cause notice discloses that the respondents had faulted MTNL for not approaching the service tax authorities for clarification. The respondents have surmised that this would have been the normal course for any person acting with common prudence. However, it is apparent from the statements of various employees of MTNL that MTNL did not believe that the amount of compensation was chargeable to service tax and therefore, there was no requirement for seeking clarifications. Further, there is no provision in the Act which contemplates any procedure for seeking clarification from jurisdictional service tax authority. Clearly, the reasoning that MTNL ought to have approached the service tax authority for clarification is fallacious.”
11.2 In view of the above, we uphold the impugned order in respect of dropping of penalties under sections 77 & 78 of the Finance Act, 1994.
12. In view of the above, we dismiss the Service Tax Appeal ST/50274/17 filed by the Revenue department. As regards Service Tax Appeal ST/50011/17 filed by the appellant -respondent, we set aside the service tax demand in respect of services provided to UN agencies and educational institutions. As regards the demand in respect of services provided in the State of Jammu & Kashmir and units in SEZ, the same is allowed by way of remand with direction to adjudicating authority below for providing an opportunity to the appellant-respondent to submit all documentary evidence to substantiate their claim to the exemption. The interest and penalties will be subject to recalculation, based on the demand confirmed, if any. The appeal filed by the appellant is thus partly allowed vis-a-vis two issues as stated above and is allowed vis-a-vis remaining two issues as stated above is allowed, by way of remand.
(Order pronounced in the open Court on 09.07.2024)
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