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2022 (11) TMI 926 - HC - Service TaxLevy of service tax - reimbursement of service tax component as raised in the invoice of the provider - applicability of Municipal Commissioner’s Circular No.83 of 2013-14 - correct interpretation of the Mega Exemption Notification issued by the Central Government or not - reverse charge mechanism - HELD THAT:- Since the appellant did not remit the service tax component to the department, show cause notices were issued to all the three appellants. The matter has culminated in an order of adjudication which has been challenged by the said service provider before the Customs, Excise and Service Tax Appellate Tribunal, Kolkata Bench (CESTAT). The learned single Bench, by the impugned order, though separate orders, they contain the same reasoning, taking note of the fact that the service tax authorities had issued summons to the appellants and that the proceedings are yet to attain finality, opined that it would be appropriate to permit the service tax authorities to conclude the proceedings against the appellants in accordance with law - the authorities deciding the liability of the service tax under the Finance Act, 1994 is the appropriate authority to adjudicate the liability of the appellant to pay service tax in respect of the contract between it and the KMC in accordance with law. Though such was the observation in the penultimate paragraph of the order, the writ petition stood dismissed. The KMC has taken a stand as is evident from the Circular No.83 of 2013-14 dated 4th January, 2014 that the services rendered by them and services given to them in rendering public services is exempted from payment of service tax in view of Mega Exemption Notification No.25/2012-ST dated 20th June, 2012 issued by the Government of India since the functioning and duties of the KMC is concomitant to the public interest as enshrined in the Constitution of India. Therefore, the KMC opined that they are not liable to pay service tax in terms of the provisions of the said notification until further orders in view of the fact that the KMC is discharging constitutional obligation imposed upon them by the Constitution of India. The correctness of the interpretation made by KMC in their Circular dated 4th January, 2014 has to be decided - The Service Tax Department has not put KMC on notice in any of the three proceedings initiated against the appellants. The appellants’ stand apart from other things is that the service tax component which is remitted by them as a service provider has to be reimbursed by the recipient, KMC. Thus, unless and until the adjudication is done in the presence of the KMC, it will not be a binding adjudication. The three appeals are disposed of by this common judgement and order by directing the concerned Service Tax Commissionerate to issue fresh notices to the appellants as well as KMC which shall be treated as continuation of the earlier show cause notices. After hearing the parties, the concerned authority shall adjudicate the issue and pass a reasoned order on merits in accordance with law - no coercive action shall be initiated against the appellants till the adjudication is complete.
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