2015 (10) TMI 780 - AT - Service Tax

Demand of Service Tax Business Auxiliary Service - Appellant conducted the lottery business liable to service tax under Section 55 (105) (zzb) ibid Appellant contended that service is covered under Section 65 (105) (zzzzn) and the same is unconstitutional and demand is unsustainable Appellant further contended that government of Arunachal Pradesh was providing service and the Appellant was paying them Respondent contends that only state governments are allowed to conduct lotteries and Appellant was allowed certain amount of earning which was taken as taxable value. Held That - Though Section 65(105)(zzzn) has been declared to be unconstitutional but constitutionality of a particular provision does not negate the constitutionality of other similar provision - BAS was rendered by the appellant to the Government of Arunachal Pradesh - Impugned demand is sustainable and appeal dismissed Decided against the assessee.

Issues involved:
1. Service tax demand for operating lottery business in Arunachal Pradesh
2. Constitutional validity of the explanation added to Section 65(19)
3. Nature of services provided by the appellant
4. Service recipient and taxable value determination

Issue 1: Service tax demand for operating lottery business in Arunachal Pradesh
The appeal was filed against a service tax demand of Rs. 25,97,710 for one period and Rs. 1,81,624 for another period related to operating a lottery business in Arunachal Pradesh. The demand was based on the appellant providing services like purchasing, marketing of lottery, and other auxiliary services, considered liable for service tax under Business Auxiliary Service (BAS) as per Section 65(105)(zzb) of the Finance Act, 1994.

Issue 2: Constitutional validity of the explanation added to Section 65(19)
The appellant argued that the demands were confirmed based on an explanation added to Section 65(19), which was declared unconstitutional by the Sikkim High Court in a different case. However, the Tribunal refrained from concluding that the unconstitutionality of one provision automatically extends to another. The Tribunal found that the service provided by the appellant fell within the scope of the said explanation, despite the constitutional challenge raised by the appellant.

Issue 3: Nature of services provided by the appellant
The Departmental Representative contended that the appellant's services related to the promotion or marketing of games of chance, falling under the scope of the explanation in question. It was highlighted that the appellant was appointed as a distributor by the government of Arunachal Pradesh to promote and market online lotteries on behalf of the government, making the appellant the service provider to the government. The taxable value of services was determined based on various financial details provided by the appellant.

Issue 4: Service recipient and taxable value determination
The contention that the appellant was making payments to the government, not vice versa, was dismissed by the Tribunal. It was clarified that the appellant, as a distributor appointed by the government, was rendering BAS to the government. The Tribunal ordered pre-deposit of the entire service tax liability along with interest, considering the prima facie sustainability of the demand. Non-compliance would lead to the dismissal of the appeals for failure to deposit the required amount.

Overall, the Tribunal upheld the service tax demand on the appellant for operating a lottery business in Arunachal Pradesh, emphasizing the nature of services provided, the contractual relationship between the appellant and the government, and the determination of taxable value based on financial submissions.

← Previous Next →