2013 (10) TMI 1397 - AT - Service Tax

Summary

Issues involved: Common issue in five appeals regarding service tax demand under Business Auxiliary Service.

Summary:
In the judgment by Appellate Tribunal CESTAT MUMBAI, the appellants, who are owners of certain properties, entered into separate 'Franchise Agreements' with M/s. Amalgamated Bean Coffee Trading Company Ltd. to run Cafe Coffee Day outlets on their properties. Show cause notices were issued demanding service tax under Business Auxiliary Service for the period from June 2003 to February 2006. The demands were confirmed by the authorities, leading the appellants to appeal.

The main contention of the appellants was that they had essentially rented out their properties to M/s. ABCTCL and had no involvement in the day-to-day operations of the cafes. They argued that the activity should be classified as renting of immovable property, which was taxable from 1.6.2007 onwards, and they had been paying service tax under this category since then.

The Revenue, on the other hand, argued that the appellants were involved in selling goods based on certain clauses in the agreement and a report from the Commissioner of Service Tax, Mumbai-II.

Upon careful consideration of the submissions and the Franchise Agreement, the Tribunal noted that the agreement was essentially about letting out immovable property for running Cafe Coffee Day outlets. The Tribunal also referred to the report from the Commissioner's office, which stated that the landlords did not provide any service other than renting the property, and all cafe activities were run by Cafe Coffee Day.

Regarding the demand raised under Business Auxiliary Service, the Tribunal analyzed the definition pre and post amendments. It found that the appellants did not provide any service falling under the definition of Business Auxiliary Service, and thus, the Revenue's contention was not accepted.

The Tribunal also addressed other arguments raised by the appellants and noted that they were not providing any business auxiliary service chargeable to service tax. Consequently, all the appeals succeeded.

Additionally, in two appeals where the appellants had paid tax and filed refund claims, the Tribunal set aside the rejection of refund claims on merits, but highlighted that further examination was needed on aspects like unjust enrichment and limitation before granting refunds.