On 14-06-2021, the two judge bench comprising of Hon’ble Sri Justice M.S Ramachandra Rao and Hon’ble Sri Justice T. Vinod Kumar adjudged “though the respondent is established as an autonomous body, the same for all purposes like administrative control, its financial needs etc., looks only to the Government. This is on account of the fact the services of the respondent are utilized for functioning of various Government agencies under different Ministries and is not run like a private commercial organization with a profit motive”, in a matter concerned with tax evasion in the case The Commissioner, Customs & Central Excise Vs. M/s. National Remote Sensing Agency [CEA NO.2 OF 2021].
The facts of the case are, respondent is an autonomous body under the department of space and research. The appellant directed the respondents to register themselves under the provisions of Finance Act, 1994 for certain services namely, 1) photography service, (2) scientific and technical consultancy service and (3) commercial training and coaching service which are categorised as taxable services under the act. The respondent obtained the registration as guided. On 23-10-2006, a show cause notice was issued by the appellant to the respondent with respect to the non-payment of service tax. The respondent submitted that the services provided by them is not under the scope of taxable services since they are not providing it to a third party. Aggrieved by this, both the appellant and the respondent filed separate appeals before a tribunal. The tribunal ruled in favour of the respondents and thus the appellant has appealed before the High Court.
To deal with the issue whether there was tax evasion was intended, the court first analysed the nature and scope of operation of the respondent by upholding the findings of the tribunal which was, “we find that the assessee in this case is an autonomous organization under the Department of Space, Government of India. It is not a private business entity. By not paying service tax the assessee is not gaining anything. It is a Governmental organization run by Bureaucrats and Scientists, none of whom have any personal interest in evading service tax. In fact, by evading service tax, nothing would be gained either by anyone individually or by their organization” . It was also observed that the services provided by the respondent was in interest of the national security and the services were given to the central and state governments. Thus, such activities wouldn’t be under the purview of the act and hence cannot be liable to tax. The learned judges upheld the decree by the tribunal and dismissed the appeal.