Central Government may grant exemption (partial or full) in public interest by issuing exemption notifications under section 93 of the Finance Act, 1994. Such exemptions may be plain exemption or conditional.

Exemptions are governed by the exemptions notifications notified in that respect. While most of the notifications are prospective and applicable from the date of issuance of notifications, if specifically specified, such exemption may also apply retrospectively.

Retrospective Exemptions

By Finance Act, 2012

Two new sections 97 and 98 were inserted in Chapter V of the Finance Act, 1994 with a view to extend Service Tax exemption retrospectively for repair of roads and non-commercial government buildings. Clause 144 of the Finance Act, 2012 gives retrospective effect to Rule 6 (6A) of Cenvat Credit Rules, 2004 w.e.f. 10.02.2006 to provide benefit to Special Economic Zones. Clause 145 of the Finance Act, 2012 gives retrospective effect w.e.f. 16.06.2005 so as to allow the service tax exemption to a club or association service provided by a club or association, including cooperative societies, in relation to the project, under the Notification No. 42/2011-ST dated 25.07.2011. The notification explains the expression ‘project’ to mean common facility set up for treatment of effluents and solid wastes, with the Central Government’s or State Government’s financial assistance.

These came into force from the date of enactment of the Finance Act, 2012, i.e., w.e.f. 28.5.2012.

In Ramky Infrastructure Ltd v. CST, Hyderabad 2012 (6) TMI 165 - CESTAT, Bangalore, it was held that exemption notification could not be given retrospective effect unless it expressly provide for retrospective amendment.

Special provision for exemption in certain cases relating to management etc of roads (Section 97 w.e.f. 28-5-2012)

“(1) Notwithstanding anything contained in section 66, no service tax shall be levied or collected in respect of management, maintenance or repair of roads, during the period on and from the 16th day of June, 2005 to the 26th day of July, 2009 (both days inclusive).

(2) Refund shall be made of all such service tax which has been collected but which would not have been so collected had sub-section (1) been in force at all material times.

(3) Notwithstanding anything contained in this Chapter, an application for the claim of refund of service tax shall be made within a period of six months from the date on which the Finance Bill, 2012 receives the assent of the President.”

The President assented to the Finance Bill, 2012 on 28.5.2012.

Vide Notification No.24/2009-ST dated 27.07.2009 service tax on repair of roads is already exempted. Vide section 97 of the Finance Act, 1994, the exemption granted to repair of roads has been extended for the earlier period from 16.06.2005 to 26.07.2009.

The old demands were dropped as issue itself does not survive in J.K. Construction v. CCE, Chennai 2012 (10) TMI 519 - CESTAT, CHENNAI; K Seerangan v. CCE, Salem 2012 (8) TMI 467 - CESTAT, CHENNAI.

Special provision for exemption in certain cases relating to management etc of non-commercial government buildings (Section 98 w.e.f. 28-5-2012)

“(1) Notwithstanding anything contained in section 66, no service tax shall be levied or collected in respect of management, maintenance or repair of non-commercial Government buildings, during the period on and from the 16th day of June, 2005 till the date on which section 66B comes into force.

(2) Refund shall be made of all such service tax which has been collected but which would not have been so collected had sub-section (1) been in force at all material times.

(3) Notwithstanding anything contained in this Chapter, an application for the claim of refund of service tax shall be made within a period of six months from the date on which the Finance Bill, 2012 receives the assent of the President.”

The President assented to the Finance Bill, 2012 on 28.5.2012.

Management, maintenance or repair service undertaken in relation to non-commercial Government buildings has been exempted from service tax vide section 98, with effect from 16.06.2005 till the new charging section, namely section 66B, comes into force.

Amendment of Rule 6 of Cenvat Credit Rules, 2004 (Section 144)

“(1) In the CENVAT Credit Rules, 2004, made by the Central Government in exercise of the powers conferred by section 37 of the Central Excise Act, 1944, sub-rule (6A) of rule 6 as inserted by clause (ix) of rule 5 of the CENVAT Credit (Amendment) Rules, 2011, published in the Official Gazette vide notification of the Government of India in the Ministry of Finance (Department of Revenue) number G.S.R. 134(E), dated the 1st March, 2011 shall stand amended and shall be deemed to have been amended retrospectively, in the manner specified in column (2) of the Eighth Schedule, on and from the date specified in column (3) of that Schedule, against the rule specified in column (1) of that Schedule.

(2) Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, any action taken or anything done or purported to have been taken or done, on and from the 10th day of February, 2006, relating to the provisions as amended by sub-section (1), shall be deemed to be and deemed always to have been, for all purposes, as validly and effectively taken or done as if the amendments made by sub-section (1) had been in force at all material times.

(3) For the purpose of sub-section (1), the Central Government shall have and shall be deemed to have the power to make rules with retrospective effect as if the Central Government had the power to make rules under section 37 of the Central Excise Act, 1944, retrospectively, at all material times.”

In the 2011 budget, sub-rule 6A was inserted under rule 6 of the Cenvat Credit Rules, 2004 to protect the service providers located in the Domestic Tariff Area from the reversal of Cenvat credit, when they supply taxable services under exemption, to the authorized operations of SEZ. The application of sub-rule 6A has been given retrospective effect from 10.02.2006.

Validation of exemption given to clubs or association including co-operative societies in relation to projects (Section 145 w.e.f. 28-5-2012)

“(1) The notification of the Government of India in the Ministry of Finance (Department of Revenue) number G.S.R. 566 (E), dated the 25th July, 2011, issued in exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994, granting exemption from the whole of service tax leviable under section 66 thereof, on the club or association service referred to in sub-clause (zzze) of clause (105) of section 65 of the said Act, provided by a club or an association including registered cooperative societies, in relation to the project, shall be deemed to have, and deemed always to have, for all purposes, validly come into force on and from the 16th day of June, 2005, at all material times.

(2) Refund shall be made of all such service tax which has been collected but which would not have been so collected as if the notification referred to in sub-section (1) had been in force at all material times.

(3) Notwithstanding anything contained in the Finance Act, 1994, an application for the claim of refund of service tax shall be made within six months from the date on which theFinance Bill, 2012 receives the assent of the President.

Explanation. - For the removal of doubts, it is hereby declared that,––

(i) project means common facility set-up for treatment and recycling of effluents and solid wastes, with financial assistance from the Central Government or a State Government;

(ii) the provisions of section 11B of the Central Excise Act, 1944, shall be applicable in case of refunds under this section.”

The President assented to the Finance Bill, 2012 on 28.5.2012.

Services provided by an association of dyeing units in relation to common effluent treatment plants was exempted from service tax vide Notification No.42/2011-ST dated 25.07.2011. The scope of the exemption has been expanded and the amended notification has been given retrospective effect from 16.06.2005.

By Finance Act, 2013

Special Exemption for taxable services provided by Indian Railways (w.e.f. 10.05.2013)

Finance Act, 2013 has inserted section 99 w.e.f. 10.05.2013 to provide retrospective amendment to Indian Railways as follows –

“99. (1) Notwithstanding anything contained in section 66, as it stood prior to the 1st day of July, 2012, or in section 66B, no service tax shall be levied or collected in respect of taxable services proved by the Indian Railway during the period prior to the 1st day of October, 2012

(2) No refund shall be made of service tax paid in respect of taxable services provided by the Indian Railway during the said period to the 1st day of October, 2012”.

It provides exemption from service tax to the extent notices have been issued upto the 28th February, 2013 under section 73, in respect of taxable services provided by the Indian Railways during the period prior to the 1st day of October, 2012.

Thus, retrospective exemption has been extended to the Indian Railways on the service tax leviable on various taxable services provided by them during the period prior to 1.10.2012, to the extent show cause notices have been issued upto 28.02.2013. Thus, all show cause notices issued during this period will be null and void by virtue of this amendment.

By Finance Act, 2014 (w.e.f. 6-8-2014)

Exemption in respect of taxable services provided by the Employees State Insurance Corporation

Finance Act, 2014 has inserted section 100 to provide for retrospective exemption up to 30.06.2012 in relation to services provided by the Employee’s State Insurance Corporation (ESIC) set up under the Employee’s State Insurance Act, 1948. The text of this section is as follows-

“100 Notwithstanding anything contained in section 66 as it stood prior to the 1st day of July, 2012, no service tax shall be levied or collected in respect of taxable services provided by the Employees ‘State Insurance Corporation set up under the Employees’ State Insurance Act, 1948, during the period prior to the is day of July, 2012”.

This section provides a retrospective exemption for the period prior to the 1st day of July, 2012 to Employees State Corporation set up under the Employee’s State Insurance Act, 1948. W.e.f. 1.7.2012, the services of Employee’s State Insurance Corporation are already exempted inEntry No. 36 of the Notification No. 25/2012-ST dated 20.6.2012.

Services by authorized persons/sub-brokers

Vide Notification No. 03/2014-ST dated 03.02.2014, a retrospective exemption from service tax payable on the services provided by an authorized person or sub-broker to the member of a recognized association or a registered association has been granted, in relation to a forward contract where such service tax was not being levied during the period from 10th September, 2004 to 30th June, 2012 in accordance with the generally prevalent practice during the said period.