CBEC has No Power to modify Scope of Exemption notification issued by Central Government: CESTAT [Read Order]

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ruled that Central Board of Excise and Customs (CBEC) has no power to modify scope of exemption notification issued by Central Government.

M/s Lakshya Education Solutions Pvt. Ltd provided commercial training and coaching to students appearing in IIT (JEE)/AIEEE exams. The appellant paid service tax only on the amount which it charged for coaching and had not paid service tax on the cost of study materials provided by it. The study materials were not standard text books and no maximum retail price was printed on them.

A show cause notice was issued to the appellant demanding service tax on the amount collected towards the study materials on the ground that exemption towards the cost of study materials under Notification No. 12/2003-ST was available only if the materials were standard text books which are priced.

The show cause notice, therefore, demanded service tax of Rupees five lakhs from the appellant invoking extended period of limitation under proviso to Section 73 (1) of the Finance Act, 1994 along with interest under Section 75 of the Finance Act. Penalties were proposed to be imposed under Section 77 and 78 for contravention of Sections 68, 69 and 70 of the Finance Act, 1994.

After following due process, the Additional Commissioner confirmed the demand and interest as proposed but had not imposed penalties. Both Revenue and the assessee appealed against the order before the Commissioner (Appeals). While the assessee assailed the confirmation of the demand and interest, Revenue has assailed the non-imposition of penalty by the Additional Commissioner.

The Commissioner (Appeals) allowed Revenue’s appeal and rejected the assessee’s appeal. Hence the present appeal has been preferred.

It is evident from the exemption notification that the exemption was available from so much of the value of all the taxable services as is equal to the value of goods and materials sold by the service provider to the recipient of service subject to the condition that there is documentary proof specifically indicating value of the said goods and materials. The reason the exemption notification was denied to the appellant was that the CBEC circular had restricted the entitlement of this exemption notification to only such materials as constituted standard text books which have a maximum retail price printed on them.

The power under Section 93 of the Finance Act was not delegated to the CBEC and, therefore, it has no right to grant exemptions or modify the exemptions granted by the Central Government. Therefore, in our considered view, the circular by the CBEC cannot modify the scope of the exemption notification.

A Bench consisting of held that “We find that the impugned order passed denying the benefit of exemption notification relying upon the CBEC Circular dated 20.06.2003 cannot be sustained as the CBEC has no power to modify the scope of the exemption notification No. 12/2003-ST dated 20.06.2003 issued by the Central Government.”

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