The New Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that any undertakes technical, inspection, and certification services which was not a statutory or sovereign function was liable for payment of service tax.
Export Inspection Agency, the appellant assessee was a body created under Section 7 of the Export (Quality Control and Inspection) Act, 1963, and works under the administrative and technical control of the Export Inspection Council the assessee was in the field organisation of the Export Council under Free Trade Agreement executed between India and foreign nation’s products, eligible for Certificate of Origin required for preferential treatment in exporting countries.
The assessee appealed against the service tax demand passed by the Commissioner (Appeals) on the services rendered by the assessee and for the imposition of a penalty.
Alok Yadav and Nilotpal Shyam, the counsels for the assessee contended that the assessee performed the sovereign function of the State and thus not liable to pay service tax for collecting fees in the discharge of said function.
Also submitted that if the recipient of a service was eligible to get a refund of the service tax charged by the service provider, then there was no need to examine whether the provider was liable to pay service tax.
Harshvadharan, the counsel for the department relied on the decisions made by the lower authorities and contended that the adjudicating authority had rightly concluded that the assessee was not discharging any sovereign functions.
The Bench observed that in the case of Krishi Upaj Mandi Samiti, Alwar, Vs Commissioner of Central Excise and Service Tax, the court held that “if land/shop/platform/space on rent/lease then and then only it can be said to be a mandatory statutory obligation otherwise it is only a discretionary function under the statute and if it is a discretionary function, then, cannot be said to be a mandatory statutory obligation/statutory activity.Hence, no exemption for service tax and claimed.”
The two-member bench comprising Rachana Gupta (Judicial) and Hemambika Priya (Technical) held that the technical, inspection, and certification services which were not a sovereign function are liable to service tax.
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