2022 (11) TMI 265 - AT - Service Tax

Valuation of services - reimbursement of electricity expenses - inclusion of facility sharing charges in the assessable value - taxability of the service charges under the head Business Support Service received from Webdunia - mutuality of services - suppression of facts - penalty under Section 77 and 78 of FA - extended period of limitation - HELD THAT - The appellant is not liable to service tax on the amount received as facility charges amounting to Rs.1,73,50,000/- as the same is wholly attributable to electricity expenses, which has been shared proportionately by the appellant and its sister concerns. Taxability of the service charges under the head Business Support Service received from Webdunia - HELD THAT - Both Webdunia, PPPL and Naidunia (appellant) are under the same management. Thus, there is element of mutuality in sharing of facility and the available news library. Accordingly, the said receipt is not chargeable to tax (of Rs.30,000/- p.m.) under the head Business Support Service . Extended period of limitation - penalties - HELD THAT - The appellant have maintained proper records of their transactions and receipts. Thus, the issue and demand in dispute is wholly interpretational in nature or by way of change of opinion. Admittedly, the appellant is registered with the Department and have regularly filed the returns and deposited the admitted tax. Accordingly, the show cause notice is bad for invoking the extended period of limitation - All penalties imposed are set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the facility sharing charges are reimbursement of electricity expenses and not includible in the taxable value.
2. Whether the appellant is correct in submitting that suppression would not be there if the demand is raised on the basis of the balance sheet and penalty under Section 77 and 78 is not imposable.
3. Taxability of the service charges under the head "Business Support Service" received from Webdunia.

Analysis:
1. The appellant, a publisher and printer of newspapers, entered agreements with Webdunia and Print Pack Pvt. Ltd. The agreements involved providing various services and facilities. The Department alleged that the appellant should pay service tax under "Business Support Service" for income received from these agreements. The show cause notice demanded service tax for the period 2007-2008 to 2011-2012. The appellant contested the demand, stating that the facility sharing charges were reimbursement of electricity expenses and not taxable. The Commissioner (Appeals) found that electricity charges were part of the facility sharing agreement, making it a provision of service. The appellant's argument of being a "pure agent" was rejected, and it was held that they provided "Renting of Immovable Property Service" along with "Facility Sharing Service."

2. The appellant further contested the taxability of service charges under "Business Support Service" received from Webdunia. They argued that they did not provide any service under this category as they only provided access to news materials and editorial facilities without charge. The appellant maintained proper records of transactions and returns, and the issue was deemed interpretational. The Commissioner (Appeals) found an element of mutuality in sharing facilities and news library among the related entities. It was held that the receipt from Webdunia was not chargeable to tax under "Business Support Service." The show cause notice was deemed invalid for invoking the extended period of limitation.

3. The tribunal held that the appellant was not liable to pay service tax on the facility charges amounting to Rs.1,73,50,000 as it was solely for electricity expenses shared with sister concerns. The demand for this amount was set aside. The appeal was allowed, and all penalties imposed were set aside. The appellant was entitled to consequential benefits as per the law. The judgment favored the appellant, emphasizing proper record-keeping and the interpretational nature of the disputes.