CCI win as GST Authorities drop Rs.7 Crore Service Tax Demand

GST authorities have dismissed a Rs.7.08 crore service tax demand on the Competition Commission of India (CCI), stating that the regulator is not required to register for service tax, resulting in no demand for service tax.

The demand of Rs.7.08 crore includes service tax of Rs.6.78 crore, education cess of Rs.2.57 lakh, secondary and higher secondary education cess of Rs.1.28 lakh, Swach Bharat cess of Rs.15.52 lakh, and Krishi Kalyan cess of Rs.9.53 lakh.

This order was given following an audit by a CGST Commissioner of an appeal filed by the CCI against the show cause notice issued by the Directorate General of GST Intelligence (DGGI), Delhi Zone.

In 2020, the DGGI issued a show cause notice based on an “intelligence report” alleging that CCI was not paying service tax on fees/consideration earned while delivering services to various individuals.

The show cause notice stated that CCI was collecting fees from individuals or businesses who sought the competition watchdog for a variety of reasons, including acquisitions, mergers, or amalgamations. However, the show cause notice said that the CCI had not registered under the Finance Act or cleared their service tax liability.

Based on CCI’s appeal, the Commissioner of CGST and Central Excise, Delhi Audit-1, has determined that the competition watchdog is a body established by an Act of Parliament, and its accounts are audited by CAG.

According to the order, CCI is not liable for service tax registration, hence no service tax claim arises. There is no demand for service tax, hence no demand for penalties exists. It is a well-established law that imposing a penalty when the entire demand is unsustainable cannot be justified.

Furthermore, because CCI is a body established by an Act of Parliament and its accounts are audited by CAG, the competition watchdog is not involved in the provision of any taxable service, and so no responsibility for non-filing of returns exists, according to the most recent ruling. The need for interest does not exist since the demand for service tax is not sustained, it noted.

It was further argued that filing is solely for statutory assessment/enforcement and not an activity under taxation statutes, and hence filing fees should not be subject to service tax.

CCI had also said that merger notifications are filed in all international jurisdictions under a fee, and no such jurisdiction charges service tax.