Pranav B Prem

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh Bench, comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member), has held that the provisions of service tax contained in Chapter V of the Finance Act, 1994 do not extend to the State of Jammu & Kashmir, and thus no service tax can be levied on services provided and consumed within the State. On this basis, the Tribunal set aside a service tax, SBC and KKC demand aggregating to around ₹4 crores, which had been confirmed by the adjudicating authority against Tower Vision India Pvt. Ltd.

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Tower Vision India is engaged in providing Passive Infrastructure Support Services to telecom operators, involving the installation, operation and maintenance of telecommunication towers. The company provides services from its registered office in Gurugram and from several branch offices across India, including a branch in Jammu & Kashmir. The Revenue issued a show-cause notice alleging that Tower Vision was liable to pay service tax on activities performed in J&K under several taxable categories, including Business Support Services, Management and Consultancy Services, and Manpower Security Services. The adjudicating authority thereafter confirmed the demand along with interest and penalties.

The assessee challenged the demand, arguing that Section 64 of the Finance Act, 1994 expressly excludes the applicability of Chapter V—governing the levy and collection of service tax—to the State of Jammu & Kashmir. Therefore, services provided by the J&K branch to clients located within the State, and consumed there, could not be taxed under the Finance Act. The assessee further submitted that the entire demand was time-barred, as they had regularly filed service tax returns and fully cooperated during departmental audits, leaving no scope for invoking the extended period of limitation.

The Tribunal accepted the assessee’s submissions, observing that the statutory framework clearly barred the imposition of service tax within the territorial limits of J&K during the relevant period. The Bench held that once Parliament itself had excluded J&K from the ambit of Chapter V, the Department could not resort to the Place of Provision of Services Rules, 2012 (POPS Rules) to indirectly impose tax. The POPS Rules, being delegated legislation, cannot override the clear mandate of the parent statute. CESTAT reiterated that when services are provided, received and consumed entirely within J&K, the Finance Act has no jurisdiction to levy service tax.

On the question of limitation, the Tribunal noted that the dispute pertained purely to an issue of interpretation of law, and the Department had all facts available on record through returns and audit materials. Therefore, no allegation of suppression or intent to evade tax could be sustained, rendering the extended limitation period unavailable.

The Tribunal also observed that the input services necessary for providing telecom tower infrastructure—such as manpower, maintenance, electricity, and security—were also procured and consumed entirely within J&K. This further confirmed that the taxable event did not occur within the territory to which the Finance Act extended.

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Relying on precedent decisions of various High Courts and earlier CESTAT rulings which consistently held that service tax laws did not apply to Jammu & Kashmir, the Bench concluded that the demand was wholly without jurisdiction. Setting aside the entire tax, interest and penalty, the Tribunal held that “the Place of Provision of Services Rules cannot override the express statutory exclusion contained in Section 64 of the Finance Act. Since Chapter V does not extend to the State of Jammu & Kashmir, no service tax can be demanded on services provided and consumed therein.” The appeal was allowed in full, bringing final relief to the assessee.

Appearance

Shri Gajendra Maheshwari and Ms. Drishty Sakhuja, Advocates for the Appellant

Shri Yashpal Singh, Authorized Representative for the Respondent

Cause Title: Tower Vision India Private Limited v. Commissioner of Central Excise, Goods & Service Tax-Gurugram

Case No: Service Tax Appeal No. 60109 of 2022

Coram: S.S. Garg (Judicial Member), P. Anjani Kumar (Technical Member)