2019 (6) TMI 566 - AT - Service Tax

Classification of services - non competition fee - Support Service of Business or Commerce or not - appellant had arrangement with some dealers to market the product on their behalf and collect the sale proceeds for them - HELD THAT - The defense put up by the appellant before us in their grounds of appeal is that the amount collected by the appellant from M/s Rajendra Trading Company as well as from other dealers of Badshah Khaini are in the nature of fees relating to discourage of competition in promoting the sales of the said dealers/retailers. It is the contention of the appellant that such fees cannot be considered as consideration towards rendering Support Service of Business or Commerce. This Tribunal in M/S JAMNA AUTO INDUSTRIES LTD. VERSUS CCE, INDORE 2017 (9) TMI 228 - CESTAT NEW DELHI has considered the issue in similar circumstance and observed that there cannot be any doubt that the appellant s action and activity of entering into non-compete agreement with JSSL is nothing but a service covered by support service of business and commerce as defined under Section 65(104c) read with Section 65(105) of Finance Act, 1994 and therefore, the consideration received for the said services is accordingly taxable. There are no reason to deviate from the aforesaid findings of the Tribunal. Besides, the Commissioner while recording the opinion that the services rendered by the appellant who are having necessary infrastructure facilities is also in the nature of Support Service of Business or Commerce has confirmed the demand - In their grounds of Appeal the Appellant has not rebutted the said finding of the Commissioner. There are no merits in the appeal - appeal dismissed.

Summary

Issues Involved:
1. Classification of the services rendered by the appellant under 'Support Service of Business or Commerce.'
2. Applicability of Service Tax on non-competition fees.
3. Validity of demand notice considering the limitation period.

Issue-wise Detailed Analysis:

1. Classification of Services Rendered:
The primary issue was whether the services rendered by the appellant could be classified under 'Support Service of Business or Commerce' as defined under Section 65(104c) of the Finance Act, 1994. The investigation revealed that the appellant provided market support services to dealers and collected consideration for these services. The learned Commissioner confirmed the demand of ?71,55,424/- on the grounds that the appellant possessed the necessary infrastructure and expertise to support the business of dealers by providing services such as procurement of orders, arranging transport, manpower, and distribution, which fall under the scope of 'Support Service of Business or Commerce.'

2. Applicability of Service Tax on Non-Competition Fees:
The appellant contended that the amount collected from M/s Rajendra Trading Company and other dealers was in the nature of non-competition fees and should not be subject to Service Tax. The Tribunal referred to the judgment in Jamna Auto Industries Ltd., where it was held that non-competition fees provided business and commercial support to the other party and thus fell under 'Support Service of Business or Commerce.' The Tribunal found no reason to deviate from this precedent, concluding that the non-competition fees collected by the appellant were indeed taxable under the said category.

3. Validity of Demand Notice Considering the Limitation Period:
The appellant argued that the demand notice issued on 5.9.2011 for the period April 2007 to October 2009 was barred by limitation. However, the learned AR for the Revenue contended that the appellant had unaccounted income and failed to disclose the transactions to the Department, justifying the invocation of the extended period of limitation. The Tribunal upheld the invocation of the extended period, noting that the appellant did not file ST-3 returns disclosing the transactions and thus the demand notice was valid.

Conclusion:
The Tribunal upheld the impugned order, confirming the demand of ?71,55,424/- with equal penalty and interest, classifying the services rendered by the appellant under 'Support Service of Business or Commerce' and holding that the non-competition fees were taxable. The appeal was dismissed, and the extended period for issuing the demand notice was deemed justified.

(Pronounced in court on 07.06.2019)