Service Tax Provisions Under Finance Act Do Not Extend To Jammu & Kashmir: CESTAT Sets Aside ₹4 Crore Demand

The Chandigarh Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the provisions of service tax under the Finance Act, 1994, do not extend to the State of Jammu & Kashmir, and accordingly set aside a service tax demand of Rs. 4 crores. S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) opined that the provision of Chapter V of the Finance Act does not extend to J&K. Once the provisions of the Finance Act are not applicable in the State of J&K, then service tax cannot be demanded by resorting to POPS Rules, which cannot override the statutory provisions. In this case, the assessee/appellant provides various taxable services at their registered premises at Gurugram and Branch Office in various states across India, including the State of Jammu & Kashmir. The assessee was engaged in providing Passive Infrastructure Support Services to various telecom operators by way of setting up and running telecommunication tower sites. The assessee provides these services in the State of J&K from its J&K Branch office to the clients located within the State. However, the Revenue alleged that the assessee is liable to pay service tax under the categories of Business Support Services, Management and Consultancy Services and Manpower Security Services. A show-cause notice was issued to the assessee, and the adjudicating authority confirmed a demand for service tax, Swachh Bharat Cess and Krishi Kalyan Cess along with interest and penalty. The assessee argued that Section 64 of the Finance Act clearly provides that the provisions of Chapter V of the Finance Act do not extend to the State of J&K. The provision establishes that J&K is outside the scope of Finance Act for the purpose of levy of service tax and thus, the services provided by the assessee in the State of J&K and consumed within the State cannot be subject to service tax under the Finance Act. With respect to the issue of limitation, the Tribunal observed that the entire demand is barred by limitation, as the assessee had been regularly filing its service tax returns and had duly furnished all relevant information during the audit proceedings conducted by the Department. The Tribunal further noted that the present dispute relates to an issue of interpretation, and therefore, no suppression of facts can be alleged. With respect to the issue of the place of provision of impugned services, the Tribunal observed that the services were provided by the assessee in the State of J&K and the input services availed by the assessee were also received in the State of J&K. Further, the bench observed that the provisions of Chapter V of the Finance Act, 1994, do not extend to the State of J&K and hence, the service tax cannot be demanded. While relying on the judgments of various Benches of the Tribunal and the High Courts, it was observed that the Place of Provisioning of Services Rules, 2012 (POPS Rules) cannot override the statutory provisions of the Finance Act. In view of the above, the Tribunal allowed the appeal and set aside the demand for service tax on the services provided by the assessee in the state of J&K. Case Title: Tower Vision India Private Limited v. Commissioner of Central Excise, Goods & Service Tax-Gurugram Case Number: Service Tax Appeal No. 60109 of 2022 Counsel for Appellant/ Assessee: Shri Gajendra Maheshwari and Ms. Drishty Sakhuja Counsel for Respondent/ Department: Shri Yashpal Singh Click Here To Read/download The Order

Service Tax Provisions Under Finance Act Do Not Extend To Jammu & Kashmir: CESTAT Sets Aside ₹4 Crore Demand

Mehak Dhiman

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