08.01.2024: CCI not liable to take service tax registration, rules CGST Commissioner Audit

In a relief for the Competition Commission of India (CCI), GST authorities have dropped a ₹7.08 crore service tax demand on the competition watchdog, ruling that the regulator is not liable to take service tax registration and hence no demand for service tax arises.

This demand of ₹7.08 crore includes service tax of ₹6.78 crore, education cess of ₹ 2.57 lakh, secondary and higher secondary education cess of ₹1.28 lakh, Swach Bharat cess of ₹15.52 lakh, and Krishi Kalyan cess of ₹9.53 lakh.

This order came from an CGST Commissioner audit on an appeal filed by the CCI against the show cause notice issued by the Directorate General of GST Intelligence (DGGI), Delhi Zone.

In 2020, the DGGI issued a show cause notice on the back of an “intelligence report” that CCI was not paying service tax on the fees/consideration received by it while providing the services to various persons.

The show cause notice highlighted that CCI was collecting fees from persons or enterprises that approached the competition watchdog for various purposes like acquisitions, mergers, or amalgamations. However, the CCI had not registered under the Finance Act nor discharged their service tax liability, the show cause notice said.

Based on an appeal filed by CCI, the Commissioner of CGST and Central Excise, Delhi Audit-1, has now ruled that the competition watchdog is a body constituted by an Act of Parliament and its accounts are audited by CAG.

CCI is not liable for service tax registration, and hence no demand for service tax arises, the order said. As there is no demand for service tax, the demand for penalties also does not arise. It is settled law that where the entire demand itself is unsustainable, the imposition of a penalty cannot be sustained.

Also, since CCI is a body constituted by an Act of Parliament and its accounts are audited by CAG, the competition watchdog is not involved in rendering any taxable service, and hence the liability related to non-filing of returns does not arise, the latest order said. The demand for interest also does not arise as the demand for service tax is not sustained, it added.

CCI had earlier submitted that it was an expert enforcement authority entrusted with the administration of the Competition Act, that the proceedings before the CCi are statutory in nature, and that the functions of CCI cannot be regarded as any “economic activity” in the sense of commerce. It was submitted that the functions of the Commission are in the nature of a tribunal.

It was also submitted that the sole purpose of filing is for statutory assessment/enforcement and not an activity within the meaning of taxation statutes, and therefore it should not attract service tax on filing fees.

CCI had also said that merger notifications are filed in all international jurisdictions under a fee, and no such jurisdiction charges service tax.

Source: The Hindu Business Line

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