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Service Tax Case Law - Financial Leasing Service
Service Tax - Financial Leasing Service - determination of the amount that has to be reversed by the appellants when common inputs/input services are used for providing output services – revenue stand that appellant has to consider the 90% which enjoys exemption from payment of service tax as exempted services and include this value for arriving at the amount that has to be reversed – assessee view that the said 90% services are not wholly exempted.
HELD - For Financial Leasing Services under Section 65(105)(zm), service tax is payable on a part of the value of such services and only 90% is exempted as per Notification No. 04/2006. Since service tax is payable on 10% of the value, it cannot be said that the services are wholly exempt from payment of service tax. The definition of exempted services uses the word “exempt from the whole of the service tax”. The formula prescribed in Rule 6(3A) also uses the word “exempted services” and is not qualified by saying exempted services as well as that part of the services which are exempted. Therefore, for applying the formula, only those services which are wholly exempted from service tax can be included to indicate the value of exempted services.
The Revenue is not justified in considering the portion of value of taxable service exempted in the formula for determining the amount to be reversed - When the Notification grants exemption to the extent of 90%, the only obvious conclusion is that the balance 10% should suffer tax and accordingly, tax liability is required to be requantified – The assessee appeal is allowed.