Service tax exclusion for Jammu & Kashmir cannot be defeated by delegated rules overriding the parent statute.

Service tax could not be levied on services provided and consumed in Jammu & Kashmir because Section 64 of the Finance Act, 1994 expressly excluded Chapter V from that State. The Revenue's reliance on Rule 6 of the Taxation of Services (Provided from Outside and Received in India) Rules, 2006 and Rule 8 of the Place of Provision of Service Rules, 2012 failed because delegated legislation cannot override the parent Act. On that basis, the service tax demand was held unsustainable, the impugned orders were set aside, and the assessee succeeded.

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Issues: Whether service tax could be levied on services provided and consumed in Jammu & Kashmir by relying on the delegated rules when the parent enactment excluded the State from the service tax provisions.

Analysis: Section 64 of the Finance Act, 1994 expressly excluded the application of Chapter V, which deals with service tax, in the State of Jammu & Kashmir. The services in question were admittedly provided and consumed in that State. Delegated rules could not override the clear statutory exclusion contained in the parent Act. The Revenue's reliance on Rule 6 of the Taxation of Services (Provided from Outside and Received in India) Rules, 2006 and Rule 8 of the Place of Provision of Service Rules, 2012 could not sustain a levy contrary to Section 64 of the Finance Act, 1994.

Conclusion: The service tax demand was unsustainable and the issue was decided in favour of the assessee.

Final Conclusion: All the impugned orders were set aside and the three appeals were allowed.

Ratio Decidendi: Delegated legislation cannot override a statutory provision, and where the parent statute excludes a territory from service tax, no levy can be sustained on services provided and consumed within that excluded territory.

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