Order Date – 13 March 2023

Parties: The Principal Commissioner of CGST & Central Excise Vs The Securities and Exchange Board of India

Facts –

• The Respondent, The Securities and Exchange Board of India was found to be undertaking certain activities under the Securities and Exchange Board of India Act, 1992 (SEBI Act) in the course of which it was collecting fees from various entities under its control, and which appeared to the Commissioner to be taxable w.e.f. 1st July, 2012;
• Accordingly, two show cause notices were issued proposing to impose duty along with interest and penalty. However, without giving the respondent any hearing on the second notice, the Commissioner passed his order in respect of both show cause notices holding that the respondent liable to pay service tax for the period October, 2012 to September, 2013 along with penalty thereon in terms of Sections 76 and 77 of the Act.
• The same was challenged by the respondent and order passed in favour of the respondent as it being a statutory authority, and performing sovereign functions, it was not liable to pay tax. Being aggrieve the appellant had filed an appeal.

Issue –

• Whether there is any liability to pay service tax on fee collected by SEBI ?

Order –

• The Divisional Bench of Hon’ble High Court observed that where Service tax has not been paid, notice is required to be served on the person chargeable to service tax within one year from the relevant date, The first show cause notice would have therefore, on the face of it be barred by limitation prescribed under Sub-section (1) of Section 73.
• The finding of fact arrived at by the CESTAT to the effect that there was no suppression, misrepresentation or fraud committed by the respondent, to enable the appellant to invoke the extended limitation clause in Section 73 is proper and based upon the correct appreciation of the record. Thus, the extended period of limitation was not applicable in the present case. 
• The CESTAT had recorded that it has withheld ascertainment of the legality of the claim made by the respondent on the question of whether it was exercising sovereign functions under the SEBI Act and therefore, not liable to pay service tax.
• The writ petition is disposed of.