CESTAT Repeals Service Tax Demand On Housekeeping Services To UN Agencies

CESTAT Repeals Service Tax Demand On Housekeeping Services To UN Agencies

Notes that the Central government granted exemption on all services to the international organization

The Delhi bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has quashed the service tax demand on housekeeping services provided to the United Nations (UN) agencies and educational institutions.

The Coram of Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) noted that the exemption to the UN was general, and the services provided to the UNDP, UNICEF, UN Women, UNAIDS, UNODC, and UNOPS were based on the 20 June 2012 Mega Exemption Notification No. 25/2012-ST.

The assessee provides manpower, cleaning and housekeeping services to domestic organizations and companies, UN organizations, and international organizations including WHO, ILO, UNESCO, FAO, and SEZ units.

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 the records of the appellant-respondent were audited, the tax department noted that the assessee was not paying service tax on the income received from the services provided to international organizations.

It issued three show-cause notices and statements of service tax demand under Manpower Services, along with interest and penalties.

The appellant contended that the demand on the services rendered to the UN were exempt under 02 August 2002 Notification No.16/2002-ST and 20 June 2012 Notification No. 25/2012-ST.

The Commissioner of Service Tax confirmed the tax demand from 01.04.2011 to 31.03.2015 under Manpower Services and cleaning/housekeeping services under Section 65(68) read with Section 65(105)(k) of Chapter V of the Finance Act, 1994.

The Commissioner also imposed interest under Section 75 and penalties under Section 76(1) but refrained from imposing penalties under Sections 77 and 78.

The assessee contended that the Commissioner did not consider that the services rendered to the UN organizations were exempt from service tax, as these were UN representatives. It added that the tax demand of Rs.1,02,11,729 against the appellant in the Financial Year 2011-12 to 2014-15 must be set aside.

The CESTAT held that the UN was part of the system, comprising specialized agencies, funds, and programs, each having its area of work, leadership, and budget. The structures were represented by funds, programs, departments, offices, subsidiaries, functional and regional commissions, and other entities.

Since these representatives had offices at different locations in India, they were part of the UN, which provided privileges and immunities under Indian laws.

The tribunal noted that the Central government granted service tax exemption on all services to the UN. There was no connection between the exemptions provided to the UN and international organizations, as they were independent entities.

Thus, the CESTAT allowed the appeal by stating that the Mega Exemption Notification No.25/2012-ST provided an exemption to the UN. It added that the notification did not have any condition that any organization or agency attached to or affiliated with the UN was to be notified under Section 3 of the United Nations (Privileges and Immunities) Act, 1947 by the Central government.