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2018 (5) TMI 404 - AT - Service TaxBusiness support services - collection of monthly licence fee - With effect from 1-2-2005, TASMAC granted permission to contractors to sell eatables in the bar and to collect the empty liquor bottles left in the bars for a monthly license fee payable by such contractors to it - It appeared to the department that the contractors can conduct their business only after issue of a licence by TASMAC, on payment of licence fee; that without the support of TASMAC in the form of giving permission to sell eatables and to collect empty bottles, contractors would have no business; therefore upto 30-06-2012, the services rendered by TASMAC is a taxable service under Support Service of Business or Commerce‛ under Section 65 (104c) read with Section 65 (105) (zzzq) of the Finance Act, 1994; that after 1.7.2012, the services are continued to be taxable since they are not covered under the negative list or otherwise exempted. Held that - An analysis of the definition in Section 65 (104c) indicates that while it is indeed an inclusive definition, the type of services sought to be taxed are those of the genre and outsources services normally prevalent in business and commerce like evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules etc. In our view, the intention of the legislature to bring within the ambit of Business Support Services only outsourced activities relating to management, logistics and customer relations etc. is vindicated by the Explanation to the said definition which exemplifies infrastructural support services‛ as providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet etc. There, then is no doubt, in our mind, that all these examples indicated in the definition are those relating to outsourcing of business, commerce, strategy planning, logistics planning and management, customer services, marketing assistance etc. We are unable to fathom how permission to run a bar adjacent to TASMAC wine shop along with a responsibility cast on the successful contractor to sell eatables and collect empty bottles, albeit for a fee, can be said to be analogous and in immediate connection with the type of activities exemplified in the inclusive definition of Support Services of Business or Commerce‛ - For the period October 2008 to 30.06.2012, the demand of service tax on the appellant under Support of Business and Commerce Services‛ is not sustainable and is set aide W.e.f. 1-7-2012, all services except those excluded by Section 65B (44), in particular, transfer of title in goods, deemed sale, transaction in money etc. will be liable to service tax or those falling in the negative list of services under Section 66D ibid or those which were specifically exempted otherwise, would be exigible to service tax levy. Appellants will be exigible to service tax liability in respect of the impugned activities only for the period 1.7.2012 to 28.03.2013 as taxable service under Section 65B (44) of the Finance Act, 1994 - There will not be any service tax liability during the period of dispute from 29.03.2013 onwards. Penalty - Held that - the entire dispute is one of interpretation and even from the record, we find that there are at least two circulars before introduction of negative list regime and one subsequent to that, which have found it necessary to dwell upon the liability to service tax in respect of such activities performed by instrumentalities of the State - Penalty set aside. Appeal allowed in part.
Issues Involved:
1. Classification of services provided by TASMAC as "Support Service of Business or Commerce." 2. Taxability of services provided by TASMAC before and after the introduction of the Negative List regime. 3. Applicability of penalties under Sections 77 and 78 of the Finance Act, 1994. Detailed Analysis: Issue 1: Classification of Services as "Support Service of Business or Commerce" The core issue was whether TASMAC's activities fell under the "Support Service of Business or Commerce" as defined under Section 65 (104c) of the Finance Act, 1994. The tribunal analyzed the inclusive definition, which encompasses services like evaluation of prospective customers, telemarketing, processing of purchase orders, etc. It was concluded that the activities of TASMAC, such as permitting contractors to run bars and sell eatables, did not align with the outsourced business services intended by the legislature. The tribunal applied the principle of "Noscitur a Sociis," meaning that the meaning of a word is to be judged by the company it keeps, and found that TASMAC's activities were not analogous to the examples provided in the definition. Issue 2: Taxability Before and After the Negative List Regime For the period up to 30.06.2012, the tribunal held that TASMAC's activities did not fall under "Support Service of Business or Commerce" and thus were not taxable. However, with the introduction of the Negative List regime on 1.7.2012, the definition of "service" under Section 65B (44) was significantly broadened. The tribunal held that TASMAC's activities from 1.7.2012 to 28.03.2013 were taxable as they did not fall under the exclusions provided in the Negative List or other exemptions. Post the amendment on 29.03.2013, TASMAC's activities gained statutory backing as sovereign functions, thus falling into the negative list and becoming non-taxable. Issue 3: Applicability of Penalties The tribunal found that the issue was one of interpretation, with multiple circulars and judicial decisions contributing to the complexity. Given this context, the tribunal concluded that penalties under Sections 77 and 78 of the Finance Act, 1994, were not warranted, as there was no evidence of fraud, willful misstatement, or suppression of facts by TASMAC. Summary: 1. For the period October 2008 to 30.06.2012, the demand for service tax on TASMAC under "Support of Business and Commerce Services" was not sustainable and was set aside. 2. TASMAC was liable for service tax for the period 1.7.2012 to 28.03.2013 under Section 65B (44) of the Finance Act, 1994. 3. No service tax liability was imposed on TASMAC from 29.03.2013 onwards due to statutory backing as sovereign functions. 4. Penalties under Sections 77 and 78 of the Finance Act, 1994, were set aside. The appeal was partly allowed on these terms.
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