Exempted Services [Rule 2(e)]
Exempted
services would include only services (not goods) which are taxable
services but are exempt from the whole of service tax leviable thereon
(such as services for which payment is received in foreign exchange or
services rendered to Diplomatic Missions etc.). Exempted services will
also
include those services on which no service tax is leviable under
the provisions of Chapter V of the Finance Act, 1994 (i.e. services out
of service tax net).
Thus, exempted services should be -
(ii) services on which service tax has not been levied.
One of the essential condition is that in case of taxable services, exemption must be from whole of service tax, and partial exemptions may not qualify for this definition. Service which are not rendered to another person but used for self use are also not subject to levy of service tax but cannot be considered as exempted services.
W.e.f. 1.4.2011 exempted service shall include trading activity vide Notification No. 03/2011-CE(NT), dated 1.3.2011.
W.e.f. 1.7.2012, it will include wholly exempt services, services under section 66B and services on which conditional abatement in allowed but excludes export of services under Rule 6A of Service Tax Rules.
In
Lally Automobiles (P) Ltd v. Commissioner (Adjudication), Central
Excise 2013 (10) TMI 863 - DELHI HIGH COURT assessee, a dealer of motor
vehicles, took credit of rent paid on premises used for trading purposes
and also engaged in repair, maintenance and servicing of motor
vehicles. In some cases, premises were exclusively used for repair,
maintenance and servicing only. Department sought reversal of credit
pertaining to trading activity. Tribunal opined, prima facie, that
amendment in rule 2(e) w.e.f. 1-4-2011 covering trading activity as
exempted service was clarificatory and retrospective. Tribunal also did
not consider aspect of invocation of extended period of limitation and
ordered pre-deposit of entire demand with interest. It was held that a
dealer of motor vehicle was not entitled to credit of rent paid for
building used for trading purposes; but, in case of services used for
both trading activity and taxable services, reversal of credit may be
sought on pro rata basis in ratio of value of two activities or on some
other just, fair and equitable basis. [Also see: Henkal Chembond Surface
Technologies Ltd. v. CCE, Thane II 2014 (1) TMI 1332 - BOMBAY HIGH
COURT].
In
Gulf Oil Corpn Ltd v. CCE, Vapi 2012 (8) TMI 45 - CESTAT, AHMEDABAD,
wherein Cenvat credit was taken by the assessee on service tax paid for
transportation of input service, it was held that trading activities
could not be considered as service or exempted service .Accordingly, as
registered dealer was neither a manufacturer nor a provider of taxable
service, there was no force in the arguments of the assesses and Cenvat
credit on the same was not available to the assessee. [Case followed:
Orion Appliances Ltd. v. CST, Ahmedabad (2010 (5) TMI 85 - CESTAT,
AHMEDABAD].
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