2019 (11) TMI 1573 - AT - Service Tax

Smart Optical Card-Based Vehicle Registration Not Taxable as Business Activity, Tribunal Rules.

Rosmerta Technologies Ltd. Versus Commissioner of CE & ST, LTU Delhi

Rosmerta Technologies Ltd. Versus Commissioner of CE & ST, LTU Delhi - TMI Issues Involved:1. Whether the issuance of smart optical card-based vehicle registration certificates (SOC-VRC) by the appellant qualifies as a taxable service under Business Auxiliary Service (BAS).2. Whether the appellant can be considered as providing services on behalf of the State Government.3. Applicability of the Circular dated 18 December 2006 issued by CBEC.4. Consistency in the Department's stance in similar cases.Issue-wise Detailed Analysis:1. Issuance of SOC-VRC as a Taxable Service under BAS:The Commissioner confirmed the demand for Service Tax on the appellant, stating that the service of issuing SOC-VRC to applicants on behalf of the State Government falls under BAS as per Section 65(19)(vi) of the Finance Act, 1994. The appellant contended that the issuance of SOC-VRC is a statutory function of the State Government under the Motor Vehicles Act and cannot be classified as a business activity. The appellant argued that this function, whether performed by the Government or delegated to them, retains its sovereign nature and is not subject to Service Tax under BAS.2. Provision of Services on Behalf of the State Government:The appellant argued that they did not provide any service on behalf of the Government to the applicants, as the Government itself issued the SOC-VRC. The appellant's role was merely facilitative, and the activity should be considered a sovereign function. The Commissioner, however, viewed the State Government as the client and the appellant as the service provider, making the service taxable under BAS.3. Applicability of the Circular dated 18 December 2006:The appellant relied on the CBEC Circular, which clarifies that activities performed by a sovereign/public authority under any law are not services provided for consideration and thus not taxable. The Commissioner, in a subsequent order for a different period, held that the issuance of SOC-VRC is a sovereign function and not taxable under BAS, based on this Circular and the decision in CCE, Bhopal vs. Smart Chip Ltd. The Department's Special Leave Petition against this decision was dismissed by the Supreme Court.4. Consistency in the Department's Stance:The appellant highlighted that the Department did not appeal against the Commissioner's order for a subsequent period, which held the issuance of SOC-VRC as a sovereign function and not taxable under BAS. Additionally, in a similar case involving Virgo Softech Ltd., the Tribunal upheld that the activity was not taxable under BAS, and this decision also attained finality as no appeal was filed by the Department. The appellant argued that the Department cannot take a contrary stand in their case.Conclusion:The Tribunal concluded that the issuance of SOC-VRC by the appellant is a statutory function of the State Government and not a business activity. Therefore, it does not fall under BAS and is not subject to Service Tax. The Tribunal emphasized the need for consistency in the Department's stance across similar cases. The impugned order dated 18 February 2013 was set aside, and the appeal was allowed.