2025 (3) TMI 505 - AT - Service Tax

Service tax abatement under N/N. 01/2006 excluded from threshold calculation for small-scale exemption under N/N. 06/2005

Surjit Singh, Harcharan Singh, Daljit Singh, Ranjit Singh, Jasbir Singh Sidhu, Jatinder Pal Singh, Krishan Chand, Harjinder Singh, Harpreet Singh, Surjit Khan, Nachhatter Kaur, Bhupinder Singh, Raj Kumar, Jaswinder Singh, Kulwant Kaur, Pritpal Singh Versus Commissioner of Central Excise, Chandigarh-II

CESTAT Chandigarh held that abatement under N/N. 01/2006 should not be included when calculating the threshold limit for small-scale exemption under N/N. ... Abatement given by N/N. 01/2006 to be included for the purposes of calculation of threshold limit for availing small-scale exemption under N/N. 06/2005 dated 01.03.2005 - HELD THAT:- This Bench has decided the issue in respect of similarly placed appellants vide Final Order No.60311-60317/2023 dated 30.08.2023 [2023 (9) TMI 1254 - CESTAT CHANDIGARH]. The Bench observed that 'the gross value of the taxable service rendered by each of the appellants is less than the threshold limit of Rs.10 Lakhs as prescribed under Notification No.06/2005-ST dated 01.03.2005 after giving allowance to the exemption for 60% of the gross receipt in terms of Notification No.01/2006-ST dated 01.03.2006.' While computing the threshold exemption limit under N/N. 06/2005 dated 01.03.2005, abatement available under N/N.01/2006 should not be included for arriving at gross value of service. In view of the same, all the impugned orders are liable to be set aside except the one in the case of Shri Surjit Khan wherein some duty liability arises even after excluding the abatement of 60%. Conclusion - The abatement under N/N. 01/2006 should not be included in calculating the threshold limit for the small-scale exemption under N/N. 06/2005. Appeal allowed in part. The issues presented and considered in the judgment are as follows:1. Whether the abatement given by Notification No. 01/2006 should be included for the calculation of the threshold limit for availing the small-scale exemption under Notification No. 06/2005.2. Whether the appellants are liable to pay service tax under the category of 'Rent a Cab Scheme Operators Service'.3. Whether penalties under sections 76 and 78 of the Finance Act are imposable on the appellants.Issue-wise detailed analysis:The Court considered the relevant legal framework, precedents, interpretation, reasoning, key evidence, findings, application of law to facts, treatment of competing arguments, and conclusions as follows:The Court analyzed the contention that the abatement provided by Notification No. 01/2006 should not be included in the calculation of the threshold limit for availing the small-scale exemption under Notification No. 06/2005. The Court referred to a previous decision by the CESTAT Chandigarh, which held that if 60% of the consideration received by the appellants is excluded, they fall under the exempted category and are not liable to pay any tax. The Court further cited the case of Ashok Kumar Mishra, where it was held that the 60% exemption should not be considered for calculating the threshold limit. The Court ultimately concluded that the abatement under Notification No. 01/2006 should not be included in determining the gross value of service for the purpose of the threshold limit under Notification No. 06/2005.Regarding the liability of the appellants to pay service tax under the category of 'Rent a Cab Scheme Operators Service', the Court considered the argument that the appellants fall within the small-scale exemption limit and are not liable to pay any service tax. The Court noted that the appellants provided buses to PRTC on a per-kilometer basis and that there was no renting arrangement involved. Citing a decision by the High Court of Uttrakhand, the Court held that in the absence of a renting arrangement, there is no liability to pay service tax. Therefore, the Court concluded that the appellants were not liable to pay service tax under the 'Rent a Cab Scheme Operators Service' category.In addressing the issue of penalties under sections 76 and 78 of the Finance Act, the Court agreed with the appellants' argument that the issue was interpretational in nature and that there were different opinions taken by various authorities. The Court held that mens rea cannot be alleged against the appellants, and therefore, penalties cannot be imposed. As a result, the Court set aside the penalties under sections 76 and 78.Significant holdings:The Court held that the abatement under Notification No. 01/2006 should not be included in calculating the threshold limit for the small-scale exemption under Notification No. 06/2005. The Court also determined that the appellants were not liable to pay service tax under the 'Rent a Cab Scheme Operators Service' category. Additionally, the Court held that penalties under sections 76 and 78 of the Finance Act could not be imposed on the appellants due to the interpretational nature of the issue and the absence of mens rea.In conclusion, the Court partially allowed the appeal of one appellant, reducing the service tax liability while setting aside the penalties. For all other appeals, the Court allowed them, indicating that the appellants were not liable to pay service tax and penalties.