2022 (3) TMI 593 - AT - Service Tax

Nature of activity - service or not - business support services or not - Instalation of fixed facilities in the premise of customer/buyer - uninterrupted supply of gas - prior to 01.07.2012 - cum-duty benefit is available to the assessee or not - invocation of extended period of limitation - penalty - HELD THAT - In the present case, it is an admitted fact that the appellant assessee is engaged in the manufacture and sale of oxygen gases. They have entered into agreement with customer/buyer for sale of such industrial gases and as per the agreement the Appellant assessee have to ensure uninterrupted supply of gas in the factory of the customer/buyer for which they have installed fixed facilities in the premise of customer/buyer. Thus in the present case the Appellant assessee has not undertaken any service activity for the customer/buyer by installing fixed facilities. Therefore, no question of outsourcing of any activity by the customer/buyer to the Appellant assessee arises in this case. Thus, charges received by the Appellant-assessee in respect of fixed facility are outside the preview of the Business Support Services. To fall within the ambit of Business Support Services it is essential that activity should be supportive to the main activity undertaken by the client. Where as in the present case, the activity of installing and maintaining fixed facility undertaken by the Appellantassessee for supplying oxygen gas manufactured by it to the buyer/client. Thus, in this case the fixed facility installed by the Appellant-assessee is used by the Appellant-assessee itself and it is in no way construed as supporting activity for the buyer/client of the Appellant-assessee. Given this, fixed charges received by the Appellant-assessee from the buyer/client cease to fall within the ambit of business support services. Therefore, demand of service tax confirmed by the Ld. Adjudicating Authority is not sustainable and is liable to be set aside. In the present case it is admitted by the Department that the Appellant assessee has not charged service tax separately from the client. Given this, the service tax should have been computed backward by treating the total receipts as inclusive of service tax. Extended period of limitation - HELD THAT - The Appellant has not discharged service tax on the fixed facility charges being of bonafide belief that the said fixed facility is installed for the Appellant's use and benefit and they are not providing any service to the client and the activity of installing and maintaining fixed facilities for supplying of oxygen to the client do not fall under any category of service defined during the period prior to 01.07.2012 i.e. before introduction of negative list. Further, after introduction of the Negative list as the scope of service was much widened, the Appellant started paying service tax after 01.04.2012 - the demand of service tax confirmed by the Ld. Adjudicating Authority by invoking extended period is not sustainable and liable to be set aside. It is held in plethora of judgments that where the facts were in the knowledge of the Department, in such situation, extended period cannot be invoked. In case of MAHESHWARI MILLS LTD. VERSUS COMMISSIONER OF C. EX., AHMEDABAD 2003 (12) TMI 390 - CESTAT, NEW DELHI the Tribunal has held that suppression of fact cannot be alleged when facts were within the knowledge of the department. Penalty - HELD THAT - The ingredients for invocation of extended period of limitation under Section 73(1) of the Act and imposition of penalty under Section 78 of the Act are identical. Once the extended period of limitation cannot be invoked in the facts of the present case, there is no question of imposition of any penalty under Section 78 of the Act. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
(a) Whether the fixed facility installed by the Appellant assessee in the present case is outside the purview of the Finance Act, 1994.
(b) Whether cum-duty benefit is available to the assessee.
(c) Whether the extended period is invocable.

Detailed Analysis:

(a) Whether the fixed facility installed by the Appellant assessee in the present case is outside the purview of the Finance Act, 1994:
The Department contended that the fixed facilities installed by the Appellant for uninterrupted supply of gas fall within the purview of Business Support Services and are therefore liable to service tax. The term "Support service of business or commerce" as defined in Section 65(104c) of the Act does not categorize the provision of gas supply. The explanation to the definition clause specifies that infrastructural support services should include office utilities and other facilities for smooth office operations. The main activity of the appellant is the manufacture and supply of gas, and the installation of fixed facilities is for continuous gas supply, not for providing 'infrastructure support service' or 'business support services'. The Tribunal referenced Circular No. 334/4/2006-TRU, dated 28-2-2006, which clarified that Business Support Services are meant for outsourced activities. The Tribunal concluded that the fixed facility charges are outside the purview of Business Support Services and hence, not liable to service tax.

(b) Whether cum-duty benefit is available to the assessee:
The Tribunal noted that as per Section 67(2) of the Finance Act, 1994, where the gross amount charged is inclusive of service tax, the value of the taxable service should be computed backward by treating the total receipts as inclusive of service tax. The Appellant had not charged service tax separately from the client, and thus, the service tax should have been computed backward. Reliance was placed on precedents such as Service Tax, Bangalore Vs Prompt Smart Security and others.

(c) Whether the extended period is invocable:
The Show Cause Notice was issued on 04.02.2013 for the period August 2009 to November 2012. The extended period of limitation can only be invoked if there is intent to evade tax due to fraud, collusion, willful misstatement, or suppression of facts. The Tribunal found no suppression of facts as the Department was aware of the Appellant's activities. The Appellant had a bona fide belief that the fixed facility charges were not liable to service tax. Therefore, the invocation of the extended period was not justified, and the demand of service tax was not sustainable.

Conclusion:
The Tribunal concluded that the fixed facility charges received by the Appellant do not fall under Business Support Services and are outside the purview of the Finance Act, 1994. The cum-duty benefit is available to the assessee as the service tax should be computed backward. The extended period of limitation was not invocable due to the absence of suppression of facts. Consequently, the demand of service tax confirmed by the Adjudicating Authority was set aside, and the appeal filed by the Department was dismissed while the appeal filed by the assessee was allowed with consequential relief.