CIR. NO.51/13/2002-CX(ST), DT. 07/01/2003

Classification of Services.

I am directed to say that doubts have been raised regarding classification of certain services which appear to fall under two or more categories simultaneously. Some instances where such problems have arisen relate to Management Consultants vs. Manpower Recruitment Services, Mandap Keepers vs. Convention Services, Rent-A-Cab Scheme vs. Tour Operators, Cargo Handling Services vs. Storage And Warehousing Services, Architect vs. Interior Decorator, Scientific And Technical Consulting Services vs. Consulting Engineer, Practicing Chartered Accountants vs. Management Consultants, etc.

2. The matter has been examined in the Board. It is hereby clarified that any service (transaction) can be taxed only once, even if it appears to fall under two or more categories. Therefore, before levying service tax it is essential to determine under which category a particular service falls. It should be kept in mind that service tax is a tax on the service provided and is recovered from the service provider (in some cases even from the service recipient). The position is akin to Central Excise duty which is charged on manufactured goods. Just as Central Excise duty can not be charged twice on the same goods under two separate chapters/headings/sub-headings of the Central Excise Tariff, so also Service tax can not be charged twice on the same service (transactions). However, one service provider may provide more than one taxable service. In such cases, the service provider need only take one registration, but it shall be endorsed for all the taxable services and tax liability will have to be discharged for each of the taxable services separately.

3. However, in the absence of any interpretative rules, it may become difficult at times to decide the classification of a particular service. The guiding principle should be that a service should be categorised under that category which is more specific. As for example, a hotel may rent out a conference room for an official conference where lunch is also served. A dispute could arise in this case as to whether this particular service would fall under the category of "mandap keeper" and exempt from tax vide Notification No.12/2001-Service Tax dated 20.12.2001, or it will fall under the category of "convention services" and charged to service tax. Between the two competing categories, in this case, the more specific one would be that of a "convention service" since a "mandap keeper" includes official, social as well as business functions whereas a "convention service" covers conventions only which is like an official function. Hence in this case the service would not be exempt from service tax.

4. Similarly, in each case where such problems arise the proper Central Excise officer has to decide on merits as to which is the more specific category and charge tax accordingly.

5. Pending issues may be disposed of on the basis of the above guidelines. Past cases need not be re-opened.

6. The field formations may suitably be informed.

7. Trade Notice may be issued for the information of the trade.

8. The receipt of this Circular may kindly be acknowledged.

9. Hindi version will follow.

F.No.178/1/2002-CX.4

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