If the substantive conditions to the exemption notifications stand fulfilled the exemption cannot be denied

CESTAT New Delhi: If the substantive conditions to the exemption notifications stand fulfilled, though not in a manner provided for the exemption cannot be denied

M/s SOTC Travels Services Pvt Ltd. vs. Principal Commissioner of Central Excise, Delhi-I; Service Tax Appeal No. 50046 of 2016; New Delhi; 20.09.2021

The Appeal has been filed by M/s SOTC Travels Service Pvt. Ltd. against the order dated 30.09.2015 passed by the Principal Commissioner of Central Excise, New Delhi by which the demand of service tax has been confirmed with interest and penalty.

Facts:

• The appellant is engaged in rendering air travel agent and other tour related services. During the period of dispute from 01.10.2008 to 31.03.2013, the appellant was rendering air travel agent services to the Embassy of the United States of America .
• In 2014, an investigation was initiated and audit of the records of the appellant was conducted in terms of rule 5A of the Service Tax Rules, 1994. During the audit, it was observed that the appellant was incorrectly availing exemption on services rendered to the US Embassy. The audit resulted into issuance of a show cause notice proposing to deny the exemption as a result of which a demand of service tax amounting to Rs. 81,11,575 was made.
• The appellant filed a reply contesting the allegations leveled in the show cause notice. Further, by a letter dated 10.07.2015, the appellant furnished copies of the undertakings issued by the US Embassy along with copies of tickets and invoices in support of its claim. However, the Principal Commissioner passed the impugned order dated 30.09.2015 denying the exemption to the appellant and confirming the demand of service tax with penalty.

Appellant’s contention:

• The appellant submitted that it was the sole and exclusive service provider for the US Embassy and operated from a desk set up within the premises of the US Embassy. On such services, the appellant was availing exemption from payment of service tax in terms of Notification dated 23.05.2007 till 30.06.2012 and, thereafter, under Notification dated 20.06.2012. These Notifications exempted services rendered to diplomatic mission or consular posts in India from payment of service tax.

Observations and findings:

A bare perusal of the Notification dated 23.05.2007 indicates that the following conditions have to be satisfied:

i. Services must have been rendered to a diplomatic mission or consular post in India;

ii. The Protocol Division of the Ministry of External Affairs must issue a certificate to the specified diplomatic mission or consular post in India stating that it is entitled to claim exemption from payment of service tax;

iii. The diplomatic mission or consular office must provide the taxable service provider an authenticated copy of such certificate along with an original undertaking (signed and serially numbered) stating that the services have been received for official purpose; and iv. The invoice raised by the service provider must carry the date and serial number of the undertaking.

•  There is no dispute in the present appeal with regard to the fulfilment of the first condition. The second condition states that the Protocol Division must issue a certificate to the diplomatic/consular post in India. In this regard, the US Embassy was issued certificates from the Protocol Division and this has not been disputed by the Department.
• The third condition relates to providing certificates and original undertakings by the diplomatic mission/ consular post in India to the service provider. The appellant in regard to the allegation in the show cause notice that the US Embassy did not provide authenticated certificate to the appellant, no finding has been recorded in the impugned order. It has been pointed out by the appellant that the certificates received from the US Embassy were duly authenticated as they carried the stamp of the US Embassy.
• These certificates have also been enclosed in the appeal memo. It would also be seen that the impugned order recorded a finding that the format of the undertaking was not proper. The appellant had furnished copies of the original undertakings received from the US Embassy. So long as the undertakings were furnished, it would be immaterial if they were not in the proper format unless some relevant requirement was not contained in the undertaking so as to make the undertaking of no consequence.
• The fourth condition to the exemption notification mentions that the invoices issued by the service provider must carry the serial number and date of the undertaking. The show cause notice has alleged that the invoices did not carry the serial number of the undertakings. The exemption was sought to be denied on this ground and the impugned order has also confirmed such denial.
• In this regard, the appellant has submitted that the appellant was able to correlate each invoice with the corresponding undertaking. This is for the reason that the passenger name and the ticket number given on the invoice has also been mentioned on the corresponding undertaking. It has, therefore, been established from the entire chain of the aforesaid documents that there is no room to doubt that the services were rendered by the appellant to the US Embassy and such services were exempted by virtue of the undertaking and certificate provided by the US Embassy to the appellant.
• Further, the Exemption Notifications was issued by the Central Government of India in the public interest to exempt taxable services provided to a foreign diplomatic mission or consular post in India. It is only to ensure that there is no evasion of tax and that services have been rendered specifically to those diplomatic missions/ consular officers to whom a certificate has been issued by the Protocol Officer that the Notifications require a correlation to be established between the invoices and the undertakings.
• Once these two documents can be correlated, though not in a manner provided for, the substantive conditions to the Exemption Notifications stand fulfilled and the exemption cannot be denied. In the present case, as noticed above, the appellant was able to correlate the invoices with the undertakings. It can, therefore, be concluded that the appellant satisfied the substantial conditions set out in the Exemption Notifications.

Held:

Thus, for all the reasons stated above, the impugned order dated 30.09.2015 passed by the Principal Commissioner was held unsustainable and set aside. The appeal was accordingly, allowed.

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