whether service provider liable to service tax for carrying works of preparation of Elector’s Photo Identity Card?

PJ/Case Law /2016-17/3370

Case:-INSTRUMENTATION LTD. VersusCOMMISSIONER OF C. EX. & S.T., LUCKNOW

Citation:-2016 (45) S.T.R. 182 (Tri. - All.)

Issue:- whether service provider liable to service tax for carrying works of preparation of Elector’s Photo Identity Card?

Brief facts:-The issue in this appeal was whether the appellant, being a service provider, liable to service tax for carrying works of preparation of Elector’s Photo Identity Card (EPIC), i.e., Matdan Pahchan Patra. SCN was issued on the appellant as it appeared to Revenue that the appellant was providing photography service under Section 65(78) of the Finance Act, 1994 w.e.f. 16-7-2001, when tax on photography service was introduced and the service was defined as:
“‘Photography’ includes still photography, motion picture photography, laser photography, aerial photography and fluorescent photography and”
Further, Section 65 (79) of the Act defines as under:
“‘Photography studio or agency’ means any professional photographer or any person engaged in the business of rendering service relating to photography”.
The appellant had entered into an agreement dated 9-3-2003 with the Governor of State of Jharkhand for preparation of EPIC, which involved photography and the same appeared to be taxable service, for which, the appellant had received service charges from the State of Jharkhand during the period from 2003-04 to 2006-07. Similar services were also provided in the States of Uttarakhand & Madhya Pradesh. The appellant was already a registered dealer under the Service Tax provisions and was filing the returns regularly and had paid the admitted service tax in respect of maintenance and repair services, commissioning and installation services.
The appellant contested the SCN among other grounds stating that their activity of preparation of EPIC was not a taxable activity as the said activity was sovereign activity of the State or the Union and hence, was not taxable under the provisions of Sections 65(78) and 65(79) of the Finance Act, 1994. The appellant had also relied upon on the ruling of this Tribunal in the case of Commr. of Customs & Central Excise, Hyderabad-II v. CMC Ltd. - 2007 (7)S.T.R.702 (Tri.-Bang.), wherein under similar circumstances, it was held that the issue of EPIC cannot be considered as “Photo Identity” falling within the definition of “Photography” and “Photography studio or agency” as per Sections 65(78) and 65(79) of the Finance Act, 1994 as the activity carried out by M/s. CMC Ltd. was sovereign activity of the State functionaries, which cannot be brought under tax limit.
However The Additional Commissioner refused to rely on the ruling of Tribunal on the ground that as the Revenue preferred appeal before the Hon’ble High Court, the issue had not attained finality and further, confirmed to proposed duty liability of Rs. 23, 73,000/- with interest and equal amount of penalty under Section 78 of the Finance Act, 1994. Further, penalty was imposed under Sections 76 and 77 of the Finance Act, 1994.
Being aggrieved, the appellant preferred appeal before the ld. Commissioner (Appeals), who was pleased to dismiss the appeal agreeing with the findings of the Additional Commissioner.
Being aggrieved, the appellant-assessee filed appeal before the Tribunal.
Appellant’s contention:-The ld. Counsel appearing for the appellant, contested that the impugned order was bad and cryptic and had ignored ruling of Tribunal, which were binding by the ld. Commissioner (Appeals). He further pointed out that the said ruling in the case of M/s. CMC Ltd. (supra), were relied on by the another Division Bench of Tribunal in the case of UTI Technology Services Ltd. v. Commr. of Service Tax, Mumbai - 2012 (26)S.T.R.147 (Tri.-Mumbai), wherein considering the issue of PAN Cards on behalf of Income Tax Department, it was held that the PAN Cards were issued in relation to sovereign function of Income Tax Department, of levy and collection of income tax. It was not in relation to any business, and hence, not leviable to service tax. He also pointed out that Division Bench also made reference to C.B.E. & C. Circular No. 89/7/2006-S.T., dated 18-12-2006, wherein Board had opined that a number of sovereign public authorities, perform certain functions/duties, which were statutory in nature. These functions were performed in terms of specific responsibility assigned to them under the law in force. The tax collected by them for performing such activities was in the nature of compulsory levy as per the provisions of the relevant statute and it was deposited into the Government Treasury. Such activity was purely in public interest and it was undertaken as mandatory and statutory function. These were not in the nature of service to any particular individual for any consideration. Therefore, such activity performed by an authority under the provisions of law, did not constitute provision of taxable service to a person and therefore, no service tax was leviable on such activities. In the similar facts and circumstances, the Division Bench of this Tribunal in the case of Commr. of Central Excise, Indore v. Ankit Consultancy Ltd. - 2007 (6)S.T.R.101 (Tri.-Del.),relying on the ruling of the Hon’ble Supreme Court in the case of Bhaktawar Singh Balkishan v. Union of India - 1988 (2) SCC 293, also held that preparation of voter list for Chief Electoral Officer, was a part of sovereign activity of State and not a business activity with an eye on profit and the same was not assessable to service tax. It was further urged that the works done of EPIC, was in the nature of Works Contract. It was further urged that the impugned order was contrary to the Circular of C.B.E. & C. and fit to be set aside. He further urged that the entire demand was time-barred as extended period of limitation was not invocable, therefore, there was no contumacious conduct or suppression of facts.

Reasoning of judgment:- After considering the rival contentions, it was held that the work done by the appellant in respect of preparation of EPIC under agreement with the Governor or the State functionaries, was a sovereign activity of the State/Union and accordingly, the said activity was held not taxable. Similar views had been expressed by the C.B.E. & C. in their Circular dated 18-12-2006 (supra). Thus, impugned order was set aside and appeal was allowed with consequential relief in accordance with law.

Decision:- Appeal allowed

Comment: -the gist of this case is that the preparation of Elector’s photo Identity card was a sovereign activity of the State/Union and was under agreement with the Governor or the State Functionaries therefore it should not be brought under the ambit of Service Tax.

Prepared by:- Monika Tak

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PJ/Case Law /2016-17/3370

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