ST - Issue of Kimberley Process certificate is a mandatory and statutory function and does not constitute provision of taxable service: CESTAT
By TIOL News Service
MUMBAI, AUG 21, 2018: THE appellant is an Export Promotion Council set up under the aegis of Ministry of Commerce & Industry. It is a non-profit institution and is registered as a charitable institution under Section 12A of the Income Tax Act, 1961. More than 5,300 jewellers spread all over the country are its members and the appellants are primarily involved in introducing the Indian Gem & Jewellery products to the international market in order to promote its goods and to facilitate the export of diamonds.
Revenue issued SCNs demanding Service Tax on the following services:-
(i) Technical Inspection and Certification Services,
(ii) Membership of Club & Association Services,
(iii) Business Exhibition Service
(iv) Business Auxiliary Services,
The Commissioner of Service Tax confirmed the demands and imposed penalties.
In appeal before the CESTAT, the appellant made a plethora of submissions and the AR too did his best.
The Bench considered the submissions and inter alia observed thus -
Technical Inspection and Certification Services - issuing Kimberley Process Certificate
+ There is no contest to the said averment that the entire process of certification does not involve any inspection of goods or processes. It is done only on the basis of documents.
+ The process of certification at the website of the appellant with the following link https://gjepc.org/images/pdf/OnlineKimberleyProcessManual.pdf. It is seen that the entire certification can be obtained online by submitting the necessary information/ documents.
+ It is seen that the duty of issuing the KP cerificates has been expressly and exclusively, by law given to the appellant. The appellants are a body created under the law. In these circumstances it cannot be denied that the issue of KP is a mandatory and statutory function and the benefit of the circular [89/7/2006-ST dated 18.12.2006] cannot be denied to the appellants.
+ It is seen that this circular [145/14/2011-ST dated 19.08.2011 relied by AR] merely decides the classification of the service. It does not specifically deals with the services of 'statutory and mandatory' nature like the earlier circular dated 18.12.2006. Thus even if the service is held to be classifiable as Technical Inspection and Certification Services, still being 'statutory and mandatory' nature no tax can be demanded in terms of the circular dated 18.12.2006. In view of above we hold in favor of the appellant on this issue. The appeal on this count is allowed.
Club & Association Service:
+ The Ld counsel for appellant has argued that in the case of Federation of Indian Chambers of Commerce & Industries (FICCI), the Tribunal - 2014-TIOL-701-CESTAT-DEL, after examining the definition of Club and Association Service, has held that Electronic and Computer Software Export Promotion Council would fall under the exclusionary clause (i) of Section 65(25a) of the Act. Section 65(25a) of the Act defines Club or Association. The said clause (i) excludes from its purview a body 'established' or 'constituted' by or any other law for the time being in force. It has been argued that appellant, just like ECSEPC, they are also a body constituted in the EXIM Policy. Thus, the decision of Tribunal in the case of FICCI (supra) squarely applies to the appellant's case.
+ We find that the ratio of this decision squarely applies to the instant case. The appellants are identically placed organization. The facts in the case of Federation of Indian Chambers of Commerce & Industries squarely apply to the instant case, thus no demand can be made against the appellant under the head of "Club or Association" service. Appeal on this count is allowed .
Business exhibition service and Business Auxilliary Service:
+ Revenue has relied on the decision in the case of Bhagvathy Traders - 2011-TIOL-1155-CESTAT-BANG-LB to assert that the claim of reimbursement towards expenses like rent for premises, telephone charges, stationery charges, etc. cannot be permitted as reimbursable expenses.
+ We find that no evidence in support of the reimbursable nature of these expenses has been brought and, therefore, the claim made by appellants cannot be accepted. The appeal on this Count is dismissed.
Penalty:
++ The issue regarding the excludability of the specific costs from the assessable value is clear. There are very specific tests provided in law for that purpose. In the facts of the case there is no scope for doubt. In these circumstances the penalty under section 76 in respect of the amount of demand confirmed. The penalty under section 77 is also upheld.
The appeal was partly allowed.
(See 2018-TIOL-2580-CESTAT-MUM)
