Conditions prescribed in New Service Tax Exemption Notification would Replace Old Notification: CESTAT [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that conditions prescribed in the new service tax exemption notification would replace old notification.

The appellants, M/s. Upshot Utility Services who are registered with the Service Tax Department for providing Manpower Recruitment Agency Services had filed half-yearly ST-3 return for the period October 2008 to March 2009 on 24.4.2009 for the aforesaid services. During the scrutiny of the said ST-3 returns, it was found that the appellant had availed the benefit of exemption Notification No. 4/2004- ST dated 31.3.2004 for the services rendered to units located inside the Special Economic Zone (SEZ) for the month of March 2009. However, the aforesaid exemption Notification was superseded by Notification No. 9/2009-ST dated 3.3.2009.

Show Cause Notice was issued to the appellant proposing to demand the short-paid service tax amount of Rs.4,44,232/- for the month of March 2009 along with appropriate interest and also to impose penalties. After due process of law, the adjudicating authority confirmed the proposals in the Show Cause Notice and demanded an amount of Rs.4,44,232/- towards short-paid service tax demand for the month of March 2009 along with appropriate interest.

The Counsel for the appellant submitted that the appellant was under the bona fide belief that the Appellant was entitled for the exemption during the disputed period as well and appellant need not pay any Service Tax as per notification 4 of 2004 read with Notification 9 of 2009-ST. There is no intention to evade payment of tax warranting exorbitant penalty. Without prejudice to the above, the appellant is entitled for the Cum-Tax benefit.

A Two-Member Bench comprising P. Dinesha, Member (Judicial) and M. Ajit Kumar, Member (Technical) observed that “It is within the remit of Government to change a policy keeping in view the economic conditions, financial constraints and many other administrative and other attending circumstances. Hence when an exemption of service tax is made under a new notification which replaces an old notification, the grant of exemption/ refund is subject to the various conditions enumerated therein.”

The Tribunal further noted that “As regards the imposition of penalty, we find that the appellant was earlier availing exemption under Notification No. 4/2004-ST dated 31.3.2004 which got superseded by Notification No. 9/2009-ST dated 3.3.2009. The exemption availed was reflected in the ST-3 returns and the demand is also only for the period of March 2009. The short payment was noticed during the scrutiny of the ST-3 returns and was a genuine mistake. Hence no penalty is imposable in this case.”

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