2019 (8) TMI 1696 - AT - Service Tax

Reverse charge mechanism - Site formation and clearance, excavation and earthmoving and demolition service - denial of the existence of recipient of service and of consideration having been received from such recipient - HELD THAT - The appellant had commenced the generation and removal of scrap in June 2008 after the possession was handed over to M/s Goldbrick Infrastructure Pvt Ltd by the vendor in February 2008 and in pursuance of memorandum of understanding (MoU) dated 20th July 2007, well before the tender process was completed, between themselves and M/s Goldbrick Infrastructure Pvt Ltd. It is now well settled law that, for a service to be taxable prior to 1st July 2012, conformity with the enumerations in section 65 (105) of Finance Act, 1994, comprising description of activity, identified recipient and consideration for such service, is unavoidable. The assigning of land to M/s Goldbrick Infrastructure Pvt Ltd was contingent upon the vendor being paid the value bid by the appellant in which there seemed to be no further role for the appellant. M/s Goldbrick Pvt Ltd did not have to bear the cost of tendering met by the appellant but, owing to the circumstances of the interlinked transactions, that was merely considered to be payment made by the appellant to the vendor for rights over the structures and machinery on the land. Acknowledgement of that as a separate transaction in which M/s Goldbrick Infrastructure Pvt Ltd had no participation was not difficult as they appeared to have interest only on the land. Consequently, the acknowledgement of the appellant having paid the cost of participation does not, of itself, lead to the conclusion that this was a payment effected to the appellant - It would, therefore, appear that the conformity of demolition and removal with the description of the taxable service along with the fortuitous possession of all the structures and machinery on the property by participation, and bearing of cost, in the tender process has prompted the confirmation of the tax liability by the adjudicating authority without ascertaining the existence of an agreement, oral or otherwise, for rendering of any service that is exclusively to benefit M/s Goldbrick Infrastructure Pvt Ltd by the appellant. The computation of value of taxable service as the sale value of scrap, adjusted for tax under Finance Act, 1994, appears to be erroneous inasmuch as that was consideration for a transaction not contemplated in Finance Act, 1994. It has been recorded in the impugned order that cost of participation in the tender which benefited M/s Goldbrick Infrastructure Pvt Ltd was consideration for the removal of structures, machinery and buildings on the property. If at all, there was consideration only this could have been it and not the sale value. There is nothing on record to establish that the costs incurred approximated the sale value. Consequently, the receipt from sales is consideration for the sales and not for service. The existence of consideration for service is not on record. There being neither recipient of a service nor any consideration for a service, the impugned order lacks authority of law and a set aside - Appeal allowed - decided in favor of appellant.

Issues:
1. Tax liability on demolition and removal services rendered by the appellant.
2. Confirmation of tax demand, interest, and penalties under the Finance Act, 1994.
3. Dispute regarding consideration received for the services rendered.
4. Interpretation of the transaction between the appellant and M/s Goldbrick Infrastructure Pvt Ltd.
5. Determination of taxable service and consideration under the Finance Act, 1994.

Issue 1: Tax liability on demolition and removal services:
The case involved tax liability on demolition and removal services provided by the appellant to M/s Goldbrick Infrastructure Pvt Ltd. The appellant argued that no service was rendered, and the demolition was solely for removing their property from the premises. The Revenue contended that the activities fell under the taxable service as per the Finance Act, 1994. The Tribunal analyzed the activities in light of the Act's provisions and determined the tax liability based on the nature of services provided.

Issue 2: Confirmation of tax demand and penalties:
The Commissioner confirmed the tax demand under the Finance Act, 1994, along with interest and penalties. The adjudicating authority imposed penalties under various sections of the Act. The Tribunal reviewed the imposition of penalties, interest, and tax demand, considering the arguments presented by both parties and the provisions of the Finance Act, 1994.

Issue 3: Dispute over consideration for services rendered:
A key point of contention was the consideration received for the services rendered during the demolition and removal process. The appellant claimed that the scrap generated was compensation for costs incurred in the tender process, while the Revenue argued that the sale proceeds of scrap constituted consideration for the services provided. The Tribunal examined the evidence and arguments to determine the actual consideration for the services rendered.

Issue 4: Interpretation of transaction with M/s Goldbrick Infrastructure Pvt Ltd:
The transaction between the appellant and M/s Goldbrick Infrastructure Pvt Ltd was scrutinized to ascertain the nature of their relationship and the obligations arising from the transaction. The Tribunal analyzed the roles of the parties, the transfer of rights and possession, and the financial aspects of the transaction to determine the legal implications and tax liabilities.

Issue 5: Determination of taxable service and consideration:
The Tribunal evaluated whether the services provided by the appellant fell within the taxable services defined in the Finance Act, 1994. Additionally, the consideration received for these services was examined to establish the nexus between the services rendered and the compensation received. The Tribunal assessed the legal requirements for taxing services and the presence of a valid consideration for such services.

In conclusion, the Tribunal found that there was no recipient of service or consideration for the services rendered by the appellant to M/s Goldbrick Infrastructure Pvt Ltd. The impugned order lacked legal authority and was set aside, leading to the allowance of the appeal. The judgment delved into the intricacies of the transaction, tax liabilities, and considerations to arrive at a comprehensive decision regarding the tax liability on demolition and removal services provided by the appellant.

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