Service Tax – Notification Issued under the Wrong Section – Board Corrects .... but keeps the old mistake
Please refer to DDT 1476–28.10.2010 , wherein we pointed out that Notification No. 26/2010 – Service Tax dated 22.06.2010, was issued under the wrong Section. We had pointed out that the Notification was issued under clause (aa) of sub-section (2) of section 94 while it should have been issued under Section 93(1) of the Finance Act.
Notification No. 26/2010 – Service Tax Dated June 22, 2010 reads as:
In exercise of the powers conferred by clause (aa) of sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the services referred to in clause (zzzo) of sub-section (105) of section 65 of Finance Act, 1994 from so much of service tax as is in excess of,-
(a) ten percent of the gross value of the ticket or rupees one hundred per journey, whichever is less, for passengers travelling in any class, within India;
(b) ten percent of the gross value of the ticket or rupees five hundred per journey, whichever is less, for passengers embarking in India for an international journey in economy class:
Provided that this exemption shall not apply xxxxxxxxxxxxxxxxxxxxxxxxxxxxx
For a recap, Section 94 empowers the Government to make Rules, while Section 93 empowers the Government to issue exemption Notifications.
DDT asked, “Will CBEC make a correction before some Tribunal Bench holds the notification as invalid as issued under a wrong Section of the ACT?”
We are happy to report that the Government has realised the mistake and issued a corrigendum. The Corrigendum reads as,
“for “clause (aa) of sub-section (2) of section 94”, read “sub-section (1) of section 93 read with clause (aa) of sub-section (2) of section 94”.
Now why to read clause (aa) of sub-section (2) of section 94 ? This clause empowers the Government to make rules for determination of amount and value of taxable service. This was an exemption notification and there was no Rules Notified.
Will the Board issue another corrigendum? It is really unfortunate that notifications are issued so callously.