Services rendered and consumed within J&K are not taxable under the Finance Act

CESTAT Overrules Service Tax Demand on Services Rendered in Jammu & Kashmir. Tribunal Reiterates Finance Act Exclusion for J&K, Nullifies Tax and Penalty Imposition on Tower Vision India Pvt. Ltd.

In a significant ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) at its Chandigarh bench, comprising Judicial Member Mr. S. S. Garg and Technical Member Mr. P. Anjani Kumar, has set aside a service tax demand against Tower Vision India Private Limited. The judgment, dated November 7, 2025, reinforces the statutory exclusion of Jammu and Kashmir from the purview of Chapter V of the Finance Act, 1994, thereby invalidating the imposition of service tax on services provided and consumed within the state.

The case originated from a show cause notice issued on April 16, 2021, which led to a demand for service tax, Swachh Bharat Cess, and Krishi Kalyan Cess, along with interest and penalties, on the services provided by Tower Vision in Jammu & Kashmir. The impugned order was passed by the Commissioner of CGST, Gurugram, based on the Place of Provision of Services (POPS) Rules, 2012, which the Department contended positioned the services within the taxable territory.

However, the Tribunal highlighted that the statutory provisions of the Finance Act, 1994, specifically exclude Jammu & Kashmir from the ambit of service tax. The Tribunal noted that the POPS Rules cannot override this statutory exclusion. The judgment emphasized that services both rendered and consumed within Jammu & Kashmir are outside the taxable territory as defined by the Finance Act. 

The Tribunal also addressed the issue of limitation, ruling that the invocation of the extended period was unjustified. It was pointed out that Tower Vision had consistently disclosed their transactions in service tax returns, and the Department was aware of these through audits, which negated any allegation of suppression of facts.

This decision aligns with previous rulings, including those by the Gujarat High Court and various benches of the Tribunal, which have consistently upheld that services rendered in Jammu & Kashmir fall outside the scope of the Finance Act, 1994. The Tribunal further stated that since the demand itself is unsustainable, the associated penalties and interest are also invalid.

The ruling not only provides relief to Tower Vision India but also sets a precedent reinforcing the jurisdictional boundaries of service tax laws concerning Jammu & Kashmir.

Bottom Line:

Service tax provisions under Chapter V of the Finance Act, 1994 do not extend to the State of Jammu and Kashmir. Services rendered and consumed within J&K are not taxable under the Finance Act, and Place of Provision of Services (POPS) Rules cannot override this statutory exclusion.

Statutory provision(s): Finance Act, 1994 Sections 64, 65B(52), 73; Place of Provision of Services Rules, 2012; Notification No. 30/2012-ST dated 20 June 2012.

Tower Vision India Private Limited v. Commissioner of Central Excise, Goods & Service Tax, (CESTAT)(Chandigarh)(Regional Bench) : Law Finder Doc Id # 2805386