Service Tax on Modi's Rallies - Why Notice and why Withdrawal?
ON February 12, the Directorate General of Central Excise Intelligence (DGCEI) has issued a letter to the BJP and its Chandigarh office. The notice reads:
Recently, it was in news that Bhartiya Janta Party has collected amount by way of tickets for entry to the rally at different places in India where Mr.Narendra Modi had addressed the public at large.
After coming into operation of the negative list regime under service tax laws w.e.f. 01.07.2012, every service is now taxable except services in negative list and in Mega Exemption list.
"As the entry tickets to the event were not for any admission to any entertainment event or access to amusement facilities (which are in the negative list) the same is taxable in the hands of the person collecting the amount of tickets. It appears that the BJP/Shri Narendra Modi has neither got registered under the Service Tax nor paid tax on collection from tickets".
You are requested to intimate with ten days of the receipt of this letter the details of amounts collected and service tax paid, if any, in regard to entry tickets to various Rallies organized after 01.07,2012 by the Bhartiya Janta Party/ Sh. Narendra Modi in the region falling under your office.
Please note that the above information has been called under the provisions of Section 14 of the Central Excise Act, 1944 as made applicable to Service Tax vide Section 83 of the Chapter V of the Finance Act, 1994.
The BJP reacted sharply and loudly. Leader of Opposition in the Rajya Sabha, Arun Jaitely commented, "Obviously, there are no tickets for Narendra Modi's rallies. Either at the rallies or elsewhere in the country, the BJP has launched a massive fund collection campaign. Our effort is to reach 10 crores households for fund collection. The Directorate General of Central Excise and Intelligence appears to be believing that the BJP/Narendra Modi renders service to those who come to attend Narendra Modi's rallies. They believe that Mr.Modi's rally is neither ‘entertainment event nor access to amusement facilities' hence they are liable to levy of service tax. A legitimate question arises if such notice for collecting funds is only being issued to the BJP or to other political parties, particularly the Congress Party. There is no doubt that the UPA government has taken leave of all its senses. I hope the people realize the extent of desperation to the extent the Congress has stooped to. If this is how the principal opposition party or its Prime Ministerial candidate can be harassed, the extent of plight of common taxpayers in the country can be easily understood."
Under attack from the BJP's top advocate and fuelled by a passionate press, DGCEI developed cold feet. It was projected as if Finance minister Chidambaram was out to hound Modi and the BJP through Service Tax. A very learned advocate of the BJP claiming to be an expert practitioner of indirect taxes appeared before National TV and forcefully argued that Service Tax is payable only for commercial activities and that in this case there was no service provider and receiver.
The DGCEI yesterday informed the BJP "no action is required to be taken at your end".
Why did the DGCEI issue the Section 14 notice to the BJP in haste and why did they withdraw it more hastily? Does the Sr. Intelligence Officer of the DGCEI believe that Modi rallies are subject to Service Tax? If so, who decided that there was no tax liability? Who has adjudicated the case even before a Show Cause Notice was issued? It is laudable that a case is dropped at the pre-investigation stage but that happened only because the noticee is BJP. Why aren't ordinary people given the same facility as Modi and BJP in respect of summons and notice? Well, there is no danger of ordinary people ever becoming Prime Ministers.
Further it is amusing that the Sr. Intelligence Officer has concluded that Modi's rally is neither ‘entertainment event nor access to amusement facilities'. Have they withdrawn the notice after finding Modi's rally as entertainment and amusement?
DGCEI Letter to BJP.
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