EFFECT OF EXEMPTION RETROSPECTIVELY

[DR.MARIAPPAN GOVINDARAJAN]

One service provider avails exemption of service under certain Notification.  The Department was of the opinion that the exemption availed by the service provider is wrong and demanded the service tax along with interest and equal penalty.  The same was confirmed by the Adjudicating Officer during August 2011.   Now the Department issued a circular  giving exemption to the service provider with effect from 01.10.2000 during Septmber 2011.   The query is - Whether on the basis of latest circular the order passed by the Adjudicating Authority is-

null and void; or

still having effect despite the circular;

Whether appeal is required to be filed for setting aside the order of Adjudicating Authority relying on the latest circular of the Department.?

 

AI Summary

Retrospective exemption: departmental circular can affect prior tax demands; file appeal and stay referring to the circular.
A departmentally issued circular granted retrospective exemption for a category of services after an Adjudicating Authority had confirmed a demand of service tax, interest and penalty where the provider had availed the exemption. The question is whether the later circular nullifies the prior adjudication. Practical advice given: the adjudication is not automatically void and an appeal (and stay application if needed) should be filed, expressly relying on the departmental circular and treating it as explanatory or clarificatory of the exemption.