2017 (9) TMI 83 - AT - Service Tax

Business Support Services - appellants are engaged in supply of water to M/s. Chhattisgarh State Industrial Development Corporation (CSIDC) - Revenue entertained a view that the arrangement between the appellant and the CSIDC, for such supply of water, will be covered for service tax purpose under the category of Support Services of Business or Commerce - Held that - Plain reading of the statutory definition will indicate that the scope of tax entry is basically for outsourcing service of such nature and do not dealt with any sale or purchase of items without reference to third party. In the present case, there is no reference to third party in the agreement or the transaction between the appellant and CSIDC. To call such sale of water, on a project developed, owned and maintained by the appellant as infrastructure support service is not tenable - the activities falling under the scope of the agreement 1998, for consideration on sale of water, cannot be taxed under the category of support of services of business or Commerce - appeal allowed - decided in favor of appellant.

Issues:
1. Interpretation of service tax liability on supply of water under the category of "Support Services of Business or Commerce."
2. Determination of whether the agreement for supply of water constitutes a pure sale transaction or falls under service tax liability.
3. Analysis of the statutory definition of "Support Services of Business or Commerce" in relation to the transaction between the parties.
4. Examination of whether the supply of water by the appellant to the CSIDC can be categorized as "Infrastructure Support Service."
5. Evaluation of the responsibilities and obligations of the parties under the agreement and their implications on service tax liability.

Analysis:
1. The appellant contested the service tax demand on the grounds that the agreement was essentially for the sale of water, not covered under the tax entry for "Support Services of Business or Commerce." The appellant emphasized that the transaction was on a principal-to-principal basis without involvement of third parties.

2. The appellant argued that the nature of activities covered under the tax entry did not include the sale of water, specifically mentioning "Infrastructure Support Service." The invoices and agreement terms indicated a pure sale transaction, distinct from services covered under the tax entry.

3. The respondent contended that the arrangement between the parties aimed at supporting the business of CSIDC, making it liable for service tax under the category of "Infrastructure Support." The transfer of assets and development of the project were highlighted as elements supporting this argument.

4. The Tribunal analyzed the agreement terms, noting the responsibilities of the parties and the nature of the transaction. It observed that the agreement focused on the sale of water by the appellant to CSIDC, with no involvement of third parties. The statutory definition of "Support Services of Business or Commerce" was examined in light of the transaction.

5. Ultimately, the Tribunal concluded that the activities under the 1998 agreement, involving the sale of water, did not fall within the scope of "support of services of business or commerce" for service tax purposes. The Tribunal set aside the impugned order, ruling in favor of the appellant based on the legal tenability of categorizing the transaction as a pure sale of water.

This detailed analysis of the judgment highlights the key arguments presented by both parties, the interpretation of relevant legal provisions, and the Tribunal's reasoning leading to the decision in favor of the appellant.

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