2013 (7) TMI 366 - AT - Service Tax

Research fee - service tax on sharing of expenses - inclusion in value Held that - When a service provider charges a consideration, he takes into account all the expenses incurred by him and includes an element of profit thus expenses are an integral part of the consideration charged - It may also happen that when the market is down the service provider may not be able to make any profit but may be rendering the service at a loss - that does not mean that the amount received is not a consideration for the services rendered - Service tax is not a tax on income or profits but a tax on provision of service - Whatever amount is charged for such provision service tax is payable irrespective of whether any profit is made by the service provider in the said transaction. Market Research Services assesse contended that the service provided does not come under the category of Market Research Services as they do not pertain to any product, service or utility - Held that - Research on equity is a product research - the term Market Research Agency was defined in section 65(69) We are of the view the equity research undertaken by the appellant falls within the scope of this definition and accordingly - appellant conducted equity research and prepared reports on the financials of the companies listed in the stock exchanges and the stock market performance of equity shares of such companies - Equities definitely come under the categories of products and considered as goods under the Sale of Goods Act, 1934 the appellant is prima facie liable to pay service tax on the said activity. Period of limitation The assesse contended that the show cause notice for demand of service tax for the period October, 2000 to March, 2003 has been issued only in March, 2005 and hence the demand is time barred Held that - It is the date of knowledge that is relevant for computing the time limit limitation period is within one year from the date of knowledge It is on record that the appellant did not inform the department of the activities undertaken in this regard any time and only in March 2004 and September 2004 they informed the activities undertaken by them to the department subsequent to the department initiating investigation on the activities of the appellant court relied on the judgement of NIZAM SUGAR FACTORY Versus COLLECTOR OF CENTRAL EXCISE, A. P. (2006 (4) TMI 127 - SUPREME COURT OF INDIA). Waiver of pre- deposit 50% of service tax demand ordered to be pre-deposited - stay granted partly.

Summary

Issues involved:
1. Classification of services provided by the appellant as "Market Research Services" for liability of service tax.
2. Consideration for the services provided by the appellant to another company.
3. Time limitation for the demand of service tax.
4. Financial hardship and pre-deposit of dues.

Analysis:

1. Classification of services as "Market Research Services":
The appellant, a joint venture company, provided research support to another company under a specific agreement. The agreement outlined services to be provided, including marketing issues and research activities. The appellant shared income and costs with the other company. The tribunal found that the appellant's income shown in the Profit and Loss account pertained to research activities. The tribunal concluded that the appellant's equity research falls under the definition of "Market Research Services" as per the Finance Act, making them liable to pay service tax.

2. Consideration for services provided:
The appellant argued that the fees received were for sharing expenses and not consideration for services. However, the tribunal disagreed, stating that expenses are an integral part of consideration for services rendered. Even if no profit is made, the amount received for services is subject to service tax. The tribunal found that the appellant's research activities constituted a service provided to the other company, warranting the payment of service tax.

3. Time limitation for service tax demand:
The appellant claimed the demand was time-barred due to delayed issuance of the show cause notice. However, the tribunal held that the date of knowledge is crucial for determining the time limit. Since the department issued the notice within one year of acquiring knowledge, the demand was not time-barred. The appellant's delayed disclosure of activities to the department contributed to this decision.

4. Financial hardship and pre-deposit of dues:
The tribunal noted that the appellant did not demonstrate financial hardship. Citing a previous case, the tribunal ordered a pre-deposit of 50% of the confirmed service tax amount within eight weeks. Compliance would result in waiving the balance amount of dues and a stay on recovery during the appeal's pendency.

In summary, the tribunal upheld the classification of the appellant's services as "Market Research Services," deemed the fees received as consideration for services provided, rejected the time limitation argument for service tax demand, and ordered a pre-deposit of dues without evidence of financial hardship.