Threshold exemption under service tax: turnover clubbing requires notice, and Rent-a-Cab aggregation uses net value after abatement.

Threshold exemption under service tax could not be denied by clubbing the turnover of two distinct service providers where the show-cause notice contained no proposal for such clubbing; the separate exemption claim was therefore sustainable. For Rent-a-Cab service, the aggregate value for threshold exemption had to be computed on the net amount after the prescribed abatement, because the exemption framework excluded amounts exempt from service tax under the relevant notification. The denial of separate threshold exemption and the computation method adopted below were set aside, with remand only for fresh quantification on the correct basis.

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Issues: (i) Whether the turnover of the two appellants could be clubbed for the purpose of threshold exemption under the service tax exemption notification; (ii) Whether, for computing aggregate value for threshold exemption in relation to Rent-a-Cab service, the gross receipts or the net amount after abatement under the exemption notification was to be taken into account.

Issue (i): Whether the turnover of the two appellants could be clubbed for the purpose of threshold exemption under the service tax exemption notification.

Analysis: The threshold exemption was claimed separately on the basis that the appellants were distinct service providers with separate business and separate PANs. The adjudication records showed no proposal in the show-cause notice for clubbing their turnover. In the absence of such a proposal, clubbing could not be sustained for denial of separate threshold exemption.

Conclusion: The clubbing of turnover was held bad and the appellants were held entitled to threshold exemption separately.

Issue (ii): Whether, for computing aggregate value for threshold exemption in relation to Rent-a-Cab service, the gross receipts or the net amount after abatement under the exemption notification was to be taken into account.

Analysis: The aggregate value provision in the threshold exemption notification excludes amounts that are exempt from the whole of service tax under the governing service tax framework or any other notification. Since the Rent-a-Cab notification granted abatement of 60% of the gross receipts, the relevant figure for aggregation was the value remaining after such abatement and not the entire gross receipts.

Conclusion: For computing aggregate value, only the net amount after abatement was to be considered.

Final Conclusion: The denial of separate threshold exemption and the manner of computation adopted below were set aside, and the matter was sent back only for fresh quantification of any tax liability on the corrected basis.

Ratio Decidendi: For threshold exemption purposes, clubbing of turnover cannot be made without a proposal in the notice, and where an exemption notification provides abatement of gross receipts, only the net taxable value after such abatement is relevant for computing aggregate value.

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