Many ambiguous situations would not have arisen if the intent of the executors of law was right

Laws are not invented, they come into being with time and circumstances. But the execution of law is far more important than its making, and nobody has a more sacred obligation to obey and follow it than those who make it.

However, there abound instances of abuse of the word and spirit of law by the finance ministry agencies. One much misused expression is 'in relation to'. The phrase came under a scanner after the Delhi high court delivered a landmark judgement in the case of Home Solutions Retail India Ltd. vs.UOI (STO 2009 DEL 825).

The said judgement changed the rules of the game, in as much as the abuse of "in relation to" term by the department was exposed. However, there are many other such phrases abused by the department. One such phrase extensively used in the Finance Act, 1994 is "does not include".

Though the makers of law had a clear intention to exclude all such services which are prefixed with the term "does not include", the law enforcement agency failed to appreciate the same. It was conveniently forgotten that the execution of law is more important than their enactment. A close examination of the definitions of taxable services under Section 65 of the Finance Act, 1994 reveals that at least two dozen services are excluded.

Here are some of the examples of such exclusions from the purview of Service tax. In the case of cleaning activity, taxable services do not include the services related to agriculture, horticulture, animal husbandry or dairying. In case of commercial or industrial construction service, they do not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams.

Similarly, in case of "site formation and clearance, excavation and earthmoving and demolition" such services provided in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovating or restoring of water sources or water bodies are not covered by the law. Another important exclusion is the services offered in relation to sponsorship of sports events.

The service industry as well as professionals are many a times unaware that though a particular service may be defined under Section 65 as a taxable service, a sub-category of such service may be excluded, thus making them not liable to pay Service tax.
One such example is services in relation to auction of property, movable or immovable, tangible or intangible, in any manner. But, this does not include auction of property under the directions or orders of a court of law or auction by the government.

Similarly, design services as defined under Section 65 (105) (zzzzd), does not include service provided by: (i) an interior decorator referred to in sub-clause (q); and (ii) a fashion designer in relation to fashion designing referred to in sub-clause (zv).
In a recently-introduced provision, cosmetic surgery or plastic surgery services, any surgery undertaken to restore or reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, degenerative diseases, injury or trauma are excluded from the purview of Service tax.

In the case of legal services, the definition "business entity" includes an association of persons, body of individuals, company or firm, but does not include an individual. In other words, an individual is excluded from the purview of Service tax irrespective of whether he is a recipient or provider of the said services. Pre-school coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognised by law in force are excluded from "commercial training or coaching services".

The list isn't exhaustive and covers many services including technical testing and analysis; telecommunication services; technical inspection and certification services and so on. Such exclusions, though very well defined and showing the intent of lawmakers, become a subject of dispute, leading to futile litigations due to lack of transparency in the system and questionable intent of executors of law.

Numerous litigations of this nature are pending at various stages.
The interpretations and misinterpretations, allegations and counter-allegations have led to ambiguous situations, which would not have arisen if the intent of the executors of law would have been the same as that of the makers of law.