CESTAT Quashes Service Tax Demand On Housekeeping Services Provided To UN Agencies
The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has quashed the service tax demand in respect of housekeeping services provided to UN agencies and educational institutions.The bench of Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that the exemption to the United Nations is general in nature, and services provided to...
The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has quashed the service tax demand in respect of housekeeping services provided to UN agencies and educational institutions.
The bench of Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that the exemption to the United Nations is general in nature, and services provided to UNDP, UNICEF, UN Women, UNAIDS, UNODC, and UNOPS are available on the basis of Mega Exemption Notification No. 25/2012-ST dated June 20, 2012.
The assessee is in the activity of providing or supplying manpower and cleaning and housekeeping services to various domestic organizations and companies, United Nations organizations, and international organizations like WHO, ILO, UNESCO, FAO, SEZ units, etc. The assessee has been filing service tax returns regularly and discharging service tax liability under the category of 'Manpower Recruitment or Supply Agency's Services'.
After an audit of the records of the appellant or respondent, the Department noted that the assessee was not paying service tax on the income received from services provided to international organizations. Three show cause notices and statements of demand raise service tax demand under Manpower Recruitment or Supply Agency Services' along with interest and penalties.
The appellant filed a reply to the show cause notice contending that the demand is in respect of services rendered by the appellant to the United Nations and are exempted under Notification No. 16/2002-ST dated August 2, 2002, and Notification No. 25/2012-ST dated June 20, 2012.
The Commissioner confirmed the service tax demand under Manpower Recruitment or Supply Agency's Services and Cleaning/Housekeeping Services provided as per Section 65(68) read with Section 65(105)(k) of Chapter V of the Finance Act 1994 for the period 01.04.2011 to 31.03.2015. The Commissioner of Service Tax also imposed interest under Section 75 and penalties under Section 76(1). The Commissioner refrained from imposing penalties under sections 77 and 78 of the Finance Act, 1994.
The assessee contended that the Commissioner did not consider that services rendered to United Nations organizations, viz., UN-Women, UNDP, UNFPA, UNICEF, UNODC, etc., are exempt from payment of service tax as these organizations are representatives of the United Nations. The service tax demand against the appellant to the extent of Rs. 1,02,11,729/- in the Financial Year 2011-12 to 2014-15 is liable to be set aside as being exempted from service tax, being services rendered to the United Nations as per Notification No. 16/2002-ST dated 02.08.2002 and Notification No. 25/2012-ST dated 20.06.2012.
The tribunal held that the United Nations is part of the UN system, which in addition to itself comprises many specialized agencies, funds, and programs, each having their own area of work, leadership, and budget. The six organs of the United Nations are being represented by the various funds, programs, departments, offices, subsidiaries, functional and regional commissions, other entities, etc. These representatives also have offices at different locations in India. Therefore, the Indian offices of these representatives of the United Nations are basically part of the United Nations, which provides various privileges and immunities under Indian law. It is seen that the Central Government, vide the aforesaid notification, granted exemption from payment service tax on all the taxable services to the United Nations. There is no connection between the exemptions provided to the United Nations and international organizations, as both are independent from each other.
The CESTAT, while allowing the appeal, held that Mega Exemption Notification No. 25/2012-ST provides exemption to the United Nations, and there is no condition in this notification that any organizations or agencies attached to or affiliated with the United Nations also require to be notified by the Central Government . under Section 3 of the United Nations (Privileges and Immunities) Act, 1947.
Counsel For Appellant: Sunil Upadhyay
Counsel For Respondent: Rajeev Kapoor
Case Title: M/s Corporate Housekeeping Services (India) Private Limited Versus Commissioner of Service Tax
Case No.: Service Tax Appeal No. 50011 Of 2017