2022 (11) TMI 1279 - AT - Service Tax

Classification of services - Business Support Services or not - Joint venture - co-developer or agent - appellant developed and built residential scheme on the land owned by Sameet and Samprat, a non-trading organization - Department contended that the appellant's activity is the Support of Business of the joint venture therefore, the appellant have provided Business Support Service - time limitation - suppression of facts or not - HELD THAT - It is clear that the appellant is not an agent and providing service to anyone else whereas the appellant (SCPL) is an active party to the joint venture with M/s. Safal Infrastructure Pvt. Limited and M/s. Pegasus Commercial Co-op Society Limited. The consideration is also on the basis of the profit of joint venture. In this fact, the appellant (SCPL) is not providing any service to any other person and the appellant was assigned the work in the capacity of co-developer and not an agent. Therefore, it cannot be said that appellant have provided Business Support Service to any other person. The Hon'ble Supreme Court in the case of UOI vs. Mahindra Mahindra Limited 1995 (3) TMI 88 - SUPREME COURT held that ordinarily the Court should proceed on the basis that apparent tenor of agreement reflects the real state of affairs. Though it is open to Revenue to allege and prove that apparent is not real. In the present case also, if strictly go through the above agreement, it is nowhere mentioned that appellant is a service provider to some service recipient. As per the agreement, all the parties to co-development agreement have been assigned to their respective jobs and all have performed in favor of the joint venture in which again all the three parties are participants. Therefore, it is clear that the appellant have not provided any service to the joint venture. Time limitation - Suppression of facts - HELD THAT - The appellant have not carried out activities clandestinely as the same were as per the co-development agreement and was on principal to principal basis. The case was made out on the observation of audit from various records of the appellant and all the transactions were admittedly recorded in the books of accounts. In this fact, the suppression of fact or any malafide to evade payment of service tax is not established. Therefore, the demand of service tax is hit by limitation also. The impugned order is not sustainable hence, the same is set-aside to the extent it confirms demand of service tax, interest and penalties - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant is liable to pay service tax under the category of "Support Service for Business and Commerce" for providing Business Support Service to the joint developer.
2. Whether the demand raised against the appellant is time-barred.

Analysis:
1. Issue 1 - Liability for Service Tax:
The case involved a joint development agreement between the appellant and other parties for the development of a commercial complex. The Revenue contended that the appellant provided Business Support Service to the joint developer and hence was liable to pay service tax. The co-development agreement clearly outlined the roles and responsibilities of each party, with the appellant contributing expertise and resources towards the joint venture. The Tribunal analyzed the agreement and concluded that the appellant, as a co-developer, was not acting as a service provider to another entity but was actively participating in the joint venture. The Tribunal referred to legal precedents and emphasized that the appellant's role did not constitute providing a service to a separate entity, leading to the decision that the appellant was not liable to pay service tax under the category mentioned.

2. Issue 2 - Time-Barred Demand:
The appellant argued that the demand for service tax was time-barred as there was no suppression of facts, and all transactions were duly recorded in the books of accounts. The Tribunal agreed with the appellant's stance, noting that the activities were conducted openly as per the co-development agreement and were not concealed. The Tribunal found no evidence of malafide intent or deliberate evasion of service tax. Consequently, the Tribunal held that the demand for service tax was indeed hit by the limitation period, further supporting the appellant's position.

In conclusion, the Tribunal set aside the impugned order confirming the demand for service tax, interest, and penalties. The appeal was allowed in favor of the appellant, providing consequential relief. The judgment was pronounced on 28.11.2022 by the Appellate Tribunal CESTAT AHMEDABAD, with detailed analysis and legal reasoning provided for each issue addressed.