The Competition Commission of India (CCI), the statutory body that regulates anti-competitive practices in the country, has received a favorable ruling from the GST authorities in a tax dispute case. The Central GST (CGST) commissioner audit has passed an order dropping a ₹7.08 crore service tax demand against the CCI, stating that the body does not provide any taxable service.
Background of the case
The case dates back to 2020, when the Directorate General of GST Intelligence (DGGI), Delhi zone, issued a show cause notice to the CCI, alleging that it was not paying service tax on the fees collected from various individuals and enterprises for services related to acquisitions, mergers, or amalgamations. The DGGI claimed that the CCI was liable to register under the Finance Act and discharge its service tax liability.
According to the DGGI, the CCI had collected fees amounting to ₹35.40 crore during 2016-17 to 2019-20 for granting approval to combinations under Section 6 of the Competition Act, 2002. The DGGI contended that these fees were in the nature of consideration for providing taxable services under the category of “other services” and were subject to service tax at the rate of 15%.
CCI’s appeal and arguments
The CCI challenged the show cause notice before the adjudicating authority, Commissioner of CGST & Central Excise, Delhi Audit-1. The CCI argued that it is a body established by an Act of Parliament and its accounts are audited by the Comptroller and Auditor General of India (CAG). The CCI also contended that it does not render any taxable service, but rather performs statutory functions in accordance with the Competition Act, 2002. The CCI further submitted that the fees collected by it are in the nature of statutory levies and not consideration for any service.
The CCI relied on various provisions of the Competition Act, 2002 and its regulations to show that the fees charged by it are not based on any contractual agreement or mutual understanding, but are fixed by the central government in consultation with the CCI. The CCI also cited various judicial precedents and circulars issued by the Central Board of Excise and Customs (CBEC) to support its case.
Adjudicating authority’s decision
The adjudicating authority examined the matter and accepted the CCI’s arguments. The authority observed that the CCI is not involved in any commercial activity or business, but rather exercises regulatory powers in public interest. The authority also noted that the fees charged by the CCI are fixed by the central government and are not based on any contractual agreement or mutual understanding. The authority concluded that the CCI does not provide any taxable service and hence is not liable to pay service tax or file returns. Accordingly, the authority dropped the service tax demand of ₹7.08 crore against the CCI.
The adjudicating authority also imposed a penalty of ₹10,000 on each of the two officers of DGGI who had issued the show cause notice to the CCI, for making frivolous allegations without any basis or evidence.
Implications of the ruling
The ruling is a significant relief for the CCI, which had been facing scrutiny over its alleged non-compliance with tax laws. The ruling also highlights the importance of careful analysis and interpretation of tax provisions and their applicability to different entities and activities. The ruling also reaffirms the status and role of the CCI as a statutory body that regulates competition in the Indian market.
The ruling is also a setback for DGGI, which had initiated action against several other statutory bodies on similar grounds. The ruling may have a bearing on those cases as well.