Segregation of Input Services for Dutiable Goods from Exempted Service Tax: Karnataka HC Remands matter [Read Order]

The Karnataka High Court has remanded the matter, ruling that the components of input services used for dutiable goods can be segregated from those used for exempted service tax.

The assessee  has challenged the order-in-original at Annexure-'A' dated 14.11.2023 and has also sought for issuance of direction observing that the services provided by assessee No.1 are eligible for exemption from payment of service tax under Mega Exemption Notification No.25/2012-ST dated 20.06.2012 as amended by notification No.13/2013 dated 10.09.2013 enclosed at Annexure-'T'. The assessee has sought for certain directions as well. The assessee has also sought for direction and request for finding to be made to the effect that penalty and interest are not leviable.

Mr. G. Shivadass, representing the assessee, argued for a remand of the case for fresh consideration. He highlighted that the matter should be re-evaluated due to the fact that several documents were not properly considered, leading to the rejection of benefits under Mega Exemption Notification No. 25/2012 and its amendment by Notification No. 13/2013.

It was contended that the findings under sections II, III, and VI of the contested order require reconsideration. He emphasized that the assessee could demonstrate to the authority that these findings were flawed and that, if the case were remanded, all contentions should remain open for review.

Further, Mr. Shivadass noted that the Mega Exemption Notification No. 25/2012, as amended, provides exemptions for services rendered by training partners approved by the National Skill Development Corporation or Sector Skill Councils. Additionally, it covers services provided under Occasional Skill Development Courses within the National Skill Certification and Monetary Reward Scheme or other schemes administered by the National Skill Development Corporation.

Despite the authority's finding in paragraph No. 66 that the exemption claim was not substantiated, Mr. Shivadass argued that a remand would allow the assessee to effectively present and explain the agreements, which are complex and bulky. He asserted that the documentation would better support the claim for exemption if the case were given another opportunity for thorough consideration.

The counsel further submitted that even in the absence of such maintenance of separate accounts if it could be demonstrated that the components of input services used in dutiable goods can be segregated from input services as regards exempted service, then the benefit of exemption to such extent would still be extended.

Such contention also requires consideration at the hands of the authority and in light of matter being remanded, said contention is also kept open with the direction for reconsideration of the finding recorded.

Accordingly, the single bench of Justice Sunil Dutt Yadav held that the order at Annexure-'A' was set aside insofar as it contained adverse findings against the assessee. The assessee must appear before the sole respondent within one month of receiving a certified copy of this order and is expected to cooperate fully in the expeditious resolution of the proceedings upon remand.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates