The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), quashed service tax demand as the activity of treating effluents discharged from member units is exempt from the levy of Service Tax.
The appellant, M/s. Perundurai Common Effluent Treatment Plant, is a company registered under the Companies Act, 1956, being an association with 14 member units, engaged in the activity of treating effluents discharged from the member units. They also collected fixed costs and variable costs from each member unit by raising the bill for the quantity of effluent water discharged from these units.
Apart from this, they also collected a 10% amount on the fixed cost towards the emergency/capital expenditure account, which would be utilized for meeting the emergency expenditure for treating the effluents. It appeared to the Department that the above activity falls under the definition of “service” as per Section 65B (44) of the Finance Act, 1994; the appellant did not register themselves with the Department and did not discharge their Service Tax liability.
Show Cause Notice was issued for the period from July 2012 to March 2014 proposing to demand the Service Tax along with interest and also for imposing penalties. After due process of law, the Original Authority confirmed the demand of Service Tax along with interest and imposed a penalty. Aggrieved by such order, the appellant is before the Tribunal.
K. Venkatesan appeared and argued on behalf of the appellant and submitted that the demand for the period from 01.07.2012 to 31.03.2014 is covered by Notification No. 08/2017-S.T. dated 20.02.2017 issued under Section 11C of the Central Excise Act, 1944 read with the Finance Act, 1994.
The Two Member Bench comprising Sulekha Beevi C.S, Judicial Member and Vasa Seshagiri Rao, Technical Member observed that “Since the activity is exempt from the levy of Service Tax as per the above Notification, we have no hesitation to hold that the demand cannot sustain and requires to be set aside, which we hereby do.”
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