2021 (12) TMI 526 - HC - Service Tax

Interpretation of statute - scope of Support Services of Business or Commerce - Applicability of 15/2006-ST dated 24th April, 2006 effective from 1st May, 2006 or the amendment to the Finance Act, 1994 with effect from 16th May, 2008 - whether the adjudicating authority was right in trying to import the fact of the definition which was inserted with effect from 2008 09 in sub-clause (zzzzj) in clause 105 of section 65 of the Act which, admittedly, came into effect only from 16th May, 2008? HELD THAT - The said sub-clause has newly been inserted in the statute. The settled legal interpretation which has been given by the Hon ble Supreme Court in several decisions when amendment brought about to a statute by insertion of a new definition or a clause, such insertion will always be prospective in nature. In this regard, guidance provided by the decision of the Hon ble Supreme Court in BALAJI ENTERPRISES VERSUS COLLECTOR OF CENTRAL EXCISE, MADRAS 1997 (5) TMI 108 - SUPREME COURT . In the said decision the Court noted that waste and scrap could not be brought to tax as aluminium in crude form as waste and scrap was already included in item no.27(A) of the Tariff and if that is so there would not have been any need for making the entry (aa) and the amendment left sub-item (A) of item 27 untouched. Thus, it was held that the sub-item (aa) was not clarificatory of sub-item (A) of item 27 and, therefore, it cannot be held to be retrospective. Thus, this aspect was rightly noted by the Tribunal. The Tribunal which is the last fact finding authority in the hierarchy of authorities under the provisions of the Act had examined the facts and concluded that the nature of activity cannot be construed within the ambit of service tax. Thus, there is no error in the order passed by the Tribunal. The appeal filed by the Revenue is dismissed and the substantial questions of law are answered against the Revenue.

Summary

Issues:
1. Interpretation of notification and amendment related to supply of tangible goods for services rendered.
2. Correct application of law by the tribunal in the impugned order.

Analysis:
1. The case involved a dispute regarding the classification of services provided by the respondent under the category of "Support Services of Business or Commerce" as defined under Section 65(104c) of the Finance Act. The Commissioner alleged that the respondent had supplied material handling machines on hire, falling under the said category. The respondent argued that the services provided did not fall within this category as they merely provided material handling equipment on hire without handling any operational details. They contended that the activity of providing material handling equipment on hire was not subject to service tax before 16th May, 2008, as clarified by the budget of 2008-09. The Tribunal held that the activity of supplying tangible goods like cranes did not fall under the category of "Support Services of Business or Commerce" before 16th May, 2008, and set aside the Commissioner's order. The Court agreed with the Tribunal's interpretation, citing precedents and the prospective nature of new definitions or clauses in statutes.

2. The Court addressed the maintainability of the appeal before them, considering the classification dispute involved. While initially appearing as a classification dispute, the core issue was whether the adjudicating authority was correct in applying a definition inserted in 2008 retrospectively. Citing the decision in Balaji Enterprises vs. Collector of Central Excise, the Court emphasized that new definitions are prospective. Additionally, they referred to a case where the Tribunal set aside a demand for service tax under a different category, emphasizing that the nature of the activity must align with the applicable tax category. The Court upheld the Tribunal's decision, stating that the Tribunal, as the final fact-finding authority, had correctly assessed the facts and concluded that the activity did not fall under the ambit of service tax. Consequently, the appeal by the Revenue was dismissed, and the substantial questions of law were answered against the Revenue.

In conclusion, the Court affirmed the Tribunal's decision, emphasizing the prospective nature of new definitions in statutes and the importance of aligning the nature of activities with the relevant tax categories. The judgment provided clarity on the interpretation of service tax laws concerning the supply of tangible goods for services rendered.