Small scale service tax exemption option cannot be withdrawn mid-year once exercised, so refund claim fails.

Under the small scale service tax exemption, a taxable service provider may choose not to avail the exemption, but once that option is exercised in a financial year it cannot be withdrawn for the rest of that year. The appellant had opted to pay service tax at the start of the year and later sought to claim the exemption threshold and refund the tax paid. That course was inconsistent with the condition attached to Notification No. 6/2005-ST, and the earlier Tribunal view on mid-year withdrawal of the option was followed. The refund rejection was therefore upheld.

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Issues: Whether the appellant, having opted to pay service tax during the financial year, could later withdraw that option and claim the benefit of the small scale exemption under Notification No. 6/2005-ST dated 01.03.2005 and a refund of the tax paid.

Analysis: The exemption notification gave a taxable service provider an option not to avail the exemption, but once that option was exercised in a financial year it could not be withdrawn for the remaining part of that year. The appellant had chosen to pay service tax at the beginning of the year and thereafter sought refund on the basis of the exemption threshold. That course of action was inconsistent with the condition attached to the notification. The earlier Tribunal decision relied upon applied the same principle and held that the option could not be changed mid-year.

Conclusion: The appellant was not entitled to withdraw the option or claim refund, and the order rejecting the refund was upheld.

Final Conclusion: The appeal failed because the exemption condition was violated, and the refund claim was rejected.

Ratio Decidendi: Under the small scale service tax exemption, an option not to avail exemption, once exercised in a financial year, cannot be withdrawn during the remaining part of that financial year.

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