What is exempted service ?
THE above Board letter states that services on which no service tax is payable are also considered as exempted service.
Remember they are only services. As per Rule 2(e)(2) of the CENVAT Credit Rules, 'Service, on which no Service Tax is leviable under Section 66B of the Finance Act', is an exempted service. This means the services in the negative list would also be considered as exempted service.
But there can be a third category - an activity that is not a service at all. Now, Section 65B(44) defines service. As per this provision, sale, employment, transaction in money etc are not SERVICE. This is akin to ‘non-excisable' goods. There are 'non services' and rule 6 of the CCR 2004 does not take care of this situation. Maybe the Board' solution is not the ultimate after all.