2020 (1) TMI 187 - AT - Service Tax

Business Support services - Branch Network Fee - whether the Branch Network Fee received by the appellant under the agreements is taxable under Business Support Service ? - time limitation. Time limitation - HELD THAT - The documents relied on by the authority for issuing Show Cause Notice are the balance-sheet, P L Account and ST-3 returns for the period from 2005-06 to 2009-10 and clearly, these are the statutory documents which have to be prepared and filed before the respective authorities within the time-frame prescribed under the respective statutes like the Income Tax Act or the Companies Act, as the case may be. Clearly, the network access fee has been picked up from these very statutory documents and therefore, there cannot be any scope to allege suppression of the same - extended period cannot be invoked. Taxability under BSS - HELD THAT - Business Support Services introduced with effect from 01.07.2012 covers only specific activities in the inclusive part of its definition and only those specific activities, if carried out, would get covered under Business Support Services. Admittedly, the appellant is nowhere alleged to have provided any of those services which are specified therein, but rather has only asked to keep intact for access whenever required. The exclusive definition of Business Support Service clearly does not cover this service. Further, the Revenue has nowhere endeavoured to bring on record anything as to whether the appellant did provide any other service other than merely agreeing to grant M/s. SFSH or its nominees right to access its branch network and agency force during the period under consideration. Although the consideration appears to be disproportionate, but however, in the absence of any evidence on record, we also cannot go any further - The law as it stood up to the introduction of Negative List did not take under Service Tax the agreement for providing any services and only with effect from 01.07.2012 did such services become taxable. The liability has been wrongly fastened under Business Support Service. Firstly, the definition of Business Support Service did not cover mere agreeing to grant right to access, which was introduced only with effect from 01.07.2012 and secondly, even on limitation, the Revenue has not been able to establish the suppression in any manner. Thus, the proceedings are barred by limitation of time and hence, the appeal should succeed on the ground of limitation as well - appeal allowed both on merits as well as limitation.

Issues Involved:
1. Taxability of 'Branch Network Fee' under 'Business Support Services.'
2. Applicability of the extended period of limitation for issuing the Show Cause Notice.

Detailed Analysis:

Issue 1: Taxability of 'Branch Network Fee' under 'Business Support Services'

The primary issue under consideration was whether the 'Branch Network Fee' received by the appellant under the agreements is taxable under 'Business Support Services.' The appellant argued that they had not rendered any services but merely agreed to provide services if required, which does not constitute a taxable event. They contended that Service Tax, as per Section 66, applies to services provided or to be provided, not on services agreed to be provided. This taxability was introduced only under the Negative List regime effective from 01.07.2012.

The court noted that Business Support Services, introduced with effect from 01.07.2012, cover only specific activities in its inclusive definition. The appellant was not alleged to have provided any of those specific services but was only required to keep the branch network intact for access whenever needed. The court found that the exclusive definition of Business Support Service does not cover this service. The Revenue did not provide evidence that the appellant rendered any services beyond merely agreeing to grant access.

The court referred to several judgments, including Commissioner of C.Ex., Meerut-I Vs. M/s. Indian Institute of Petroleum and M/s. Cricket Club of India Ltd. Vs. Commissioner of Service Tax, Mumbai, which supported the view that mere capacity to deliver a service cannot be equated with providing or agreeing to provide a service. The court concluded that the liability was wrongly fastened under Business Support Service as the definition did not cover mere agreeing to grant right to access, which became taxable only with effect from 01.07.2012.

Issue 2: Applicability of the extended period of limitation

The court examined whether the extended period of limitation could be invoked in this case. The Show Cause Notice was issued based on the appellant's statutory documents like the balance-sheet, P & L Account, and ST-3 returns, which were already within the knowledge of the Revenue. The court noted that the extended period could only be invoked in cases of fraud, collusion, willful misstatement, suppression of facts, or contravention of statutory provisions with intent to evade tax.

In this case, the court found no evidence of intentional suppression or fraud by the appellant. The materials forming the basis of the demand were already recorded and maintained in the appellant's books. The Show Cause Notice was issued alleging willful suppression of facts, but the court held that suppression could not be established when the relevant facts were already within the Revenue's knowledge.

The court referred to the decision in M/s. Amway India Enterprises Pvt. Ltd. Vs. Commissioner of C.Ex., New Delhi, which held that the extended period of limitation could not be invoked when the Department had knowledge of the relevant facts. The court concluded that the proceedings were barred by limitation as the pre-conditions for invoking the extended period were not met.

Conclusion:

The appeal was allowed both on merits and on the ground of limitation. The court held that the 'Branch Network Fee' received by the appellant was not taxable under 'Business Support Services' as the services agreed to be provided were not covered under the definition prior to 01.07.2012. Additionally, the extended period of limitation could not be invoked as the relevant facts were already within the knowledge of the Revenue.

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