Assessee cannot change Option to pay Service Tax in the middle of a FY: CESTAT denies SSI Exemption to Chartered Accountant [Read Order]

While refusing to grant benefit of Small Scale Industry’s Exemption to a Chartered Accountant in M/s. Butchaiah & Associates v. Commissioner Of Central Tax, Bangalore North, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore bench held that once assessee opted to pay Service tax from the beginning of FY, cannot change the option in the middle of a financial year.

The assessee, a Chartered Accountant, and is a proprietary concern who is engaged in providing management and financial services after retirement from service, rendered services to three clients during the year 2006.

During the relevant period, the assessee rendered services to a Company Subhash Kabini Power Corporation Ltd as financial advisor on April 2006. In the letter of engagement, it was stated that the appellant shall be paid a professional fees of Rs. 55,000/- per month inclusive of all taxes and duties from the date of joining of his service subject to deduction of tax at source and other statutory deductions as applicable. After five months, the appellant resigned from the said post but he has paid the Service Tax liability as an abundant caution and thereafter, he filed a refund claim for Rs.24,614/- on the ground that total value of the services for the said period was within the threshold limit of exemption of Rs.4,00,000/- and the appellant is eligible for the benefit of hold limit of exemption of Rs.4,00,000/- and the appellant is eligible for the benefit of as per Notification No. 6/2005-ST dated 01.03.2005.

The Department denied the request by relying on the decision in Choudhary Cotton Ginning & Pressing Factory vs. Commissioner of Central Excise, Jaipur-I, wherein it was held that since the appellant had opted for payment of Service Tax at the beginning of the financial year, as per the mandates of the said notification, it cannot change the option during the middle of the financial year, opting for the benefit provided under the said notification.

Before the Tribunal, the assessee argued that the word “inclusive of all taxes and duties” does not mean deduction of tax at source and not Service Tax and that they have an option to avail the small scale exemption at any time of the year. He further submitted that the adhoc amounts paid by him are advance deposit as an abundant caution and not payment of Service Tax, as observed by both the authorities.

Rejecting the above arguments, the bench held that “as per the exemption Notification No. 6/2005-ST dated 01.03.2005, there is a condition which is to be complied with by the service provider and as per the condition, the provider of taxable service has as an option not to avail the exemption and such exemption once exercised in a financial year, shall not be withdrawn during the remaining part of the year. In the present case, we find that this condition has been violated by the appellant and therefore, the Commissioner (A) has rightly come to the conclusion that the appellant is not entitled to the refund amount of 24,614/-.”