PER B. RAVICHANDRAN : The assessee-Appellants is an organization working under the Ministry of Power, Government of India. They are mainly entrusted with the work of developing policies and strategies for self- regulation and market principles within the overall framework of the Energy Conservation Act, 2001. As part of their duties, the assessee- Appellants provide certification of electrical appliances and approve the energy efficiency reading of these appliances. For such service, they collect Processing Fee and Labeling Fee from the manufactures of such appliances. The Revenue entertained a view that such fee collected by the assessee-Appellants is liable to Service Tax under the category of Technical Inspection and Certification Services in terms of Section 65(108) read with Section 65(105)(zzi) of the Finance Act, 1994. The original authority adjudicated and confirmed the full tax liability along with equal amount of penalty under Section 78 and further under Section 77 of the Finance Act.
2. The learned Chartered Accountant appearing for the assessee-Appellants, submitted that, their activities presently sought to be taxed are in compliance of statutory obligation provided under the Energy Conservation Act, 2001 and Bureau of Energy Efficiency (Particulars and Manners of their Display on Labels of Room Air Conditioners) Regulations, 2009. He submitted that the Processing Fee and Labeling Fee is collected for certification of energy rating of various electrical appliances like air-conditioners etc. Similar regulations exist for other appliances also.
3. The main thrust of the argument of the assessee-Appellants is that, when they have discharged their statutory obligation in terms of the Act and Regulations of the Government, Service Tax is not leviable. There is no service provider and service recipient regulation in such Statutory Act. He further contended that the original authority erred in holding that labeling of air-conditioner etc. is optional for the manufacturer. Regulation 5 of 2009 and other similar Regulations clearly stipulate that, every room air conditioner shall display label at the time of sale and such label shall be either adhered to, or attached as a swing tag, on it. For non-display, the manufacturers are liable for substantial penalty. As such, he submitted that the assessee- Appellants cannot be put to Service Tax liability.
4. The learned DR reiterated the findings of the original authority and submitted that the clarification issued by the Board stipulates that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations and the amount collected for such act should be credited to the Government treasury and, thus, the claim of the assessee- Appellants cannot be accepted.
5. We have heard both sides and perused the material available on record. In the present case, the crucial point involved is that, whether or not the assessee-Appellants have discharged the statutory obligation in pursuance to the Act of Parliament and the Regulations framed thereunder. On perusal of the Act and the Regulations, we have no doubt that the assessee-Appellants did discharge the statutory obligations mandated under the law. The fee collected in various forms is also pre-notified and fixed by the authority as per law. The mention of the original authority that the Regulation is optional for the manufacturers is erroneous. The Regulation makes it mandatory for such labeling. Even otherwise, the fee collected from such manufacturers who approached the assessee- Appellants for labeling is for statutory performance as per law. We note that the same cannot be subjected to Service Tax liability as per the provision of taxable service. Regarding further disposal of the fee collected, the learned Chartered Accountant submitted that, as per law the assessee-Appellants are required to deposit in a designated fund which will be used for organizational expansion of the assessee- Appellants, their expansion and further requirements are mandated by the Government Regulations and they are under the direct control of the Ministry of Power supported by budgetary framwork. In case of winding up of the assessee-Appellants organization, the whole of the assets and finance will lie with the Central Government under whose authority they are created.
6. In view of the above facts and discussions, we find that the impugned order is not legally sustainable. The assessee-Appellants, acting in pursuance to the statutory regulations, collected statutorily fixed fee for such performance, cannot be subjected to Service Tax. Accordingly, the impugned order is set aside and the appeal is allowed.
7. In the result, the appeal filed by the assessee-Appellants is allowed. (Dictated & pronounced in the open court) (JUSTICE DR. SATISH CHANDRA) PRESIDENT (B. RAVICHANDRAN) MEMBER (TECHNICAL) Golay