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2023 (5) TMI 1026 - AT - Service TaxLevy of Service Tax - Business Auxiliary Service (BAS) - Sharing of Revenue - services provided by unincorporated joint venture to its constituent members - principal-to-principal basis or not - tax on share of Gross Win received from the Joint Venture Entity - the Joint Venture Entity. The period in dispute is from October, 2008 to March, 2013 - applicability of circular No. 179/5/2014-S.T., dated 24/9/2014 issued by Tax Research Unit of CBIC in F. No.354/187/2013-TRU - HELD THAT - A perusal of the joint venture agreement indicates that out of the net collections from the clients (after deducting the winning amounts), these are settled, by paying 55% to M/s GGCPL and 45% to M/s BAPL. Upon analysis and scrutiny of the joint venture agreement, including the terms and conditions mentioned therein, the adjudicating authority by relying on the circular No.109/03/2009 dated 23/02/2009 issued by CBIC, had held that there is no relationship of service provider or service receiver between the parties to joint venture agreement and there is no consideration received by either side for the claim of rendering certain service. In conclusion, he had dropped the demand of service tax raised in respect of Business Auxiliary Service . This precise issue of retaining certain amount by a hospital towards the necessary infrastructure facilities provided by it to the doctors who render medical services, for which the patients are charged as fees, and the total fees paid are settled between the hospital and doctors at the ratio of 22 78 had come up for consideration earlier before two benches of the Tribunal in the case of M/S SIR GANGA RAM HOSPITAL VERSUS COMMISSIONER OF SERVICE TAX, NEW DELHI 2020 (11) TMI 536 - CESTAT NEW DELHI . The demand of service tax for which show cause notice dated 17/4/2014 was issued to the respondent relate to taxable service provided or to be provided, to a client by any person in relation to business auxiliary service under Section 65(105) (zzb) of the Finance Act, 1994. From the legal provisions on taxable service relevant to this case, joint venture agreement, the clarification issued by CBIC and the various decisions cited on the issue as discussed above, it transpires that there is no involvement of two persons, to execute the terms of agreement; one is to be considered as service provider and other to be service receiver - by relying on the circular No.109/03/2009 dated 23/02/2009 issued by CBIC, had held that there is no relationship of service provider or service receiver, between the parties to joint venture agreement and there is no consideration received by either side for the claim of rendering certain service. He has further held that the agreement specifically provides that the profit/loss arising out of the business should be shared by both sides. Thus, service tax liability cannot be fastened on the respondent - appeal of Revenue dismissed.
Issues Involved:
1. Whether the transaction between M/s. Goa Golf Club Private Limited (GGCPL) and M/s. Britto Amusement Private Limited (BAPL) under a joint venture agreement constitutes a service liable to service tax under Business Auxiliary Service (BAS). 2. Whether the adjudicating authority correctly dropped the service tax demand on the grounds that there was no service provider-service receiver relationship. 3. Whether the Revenue's appeal against the dropping of the service tax demand is valid. Issue-wise Detailed Analysis: 1. Nature of the Joint Venture Agreement and Service Tax Liability: The Revenue contends that the joint venture agreement dated 01/04/2002 between GGCPL and BAPL resulted in services provided by an unincorporated joint venture to its constituent members, making it liable for service tax under Business Auxiliary Service (BAS) as per Section 65 (19) (vi) of the Finance Act, 1994. The department claimed that GGCPL, by operating and running a casino at BAPL's premises, provided a service to the joint venture, thus attracting service tax on the share of Gross Win received from the joint venture entity. 2. Adjudicating Authority's Decision: The Commissioner, Central Excise & Service Tax, Goa, concluded that the profit shared between the joint venture members could not be considered as consideration for providing any taxable service. The adjudicating authority found no separate service provider and service receiver existing within the joint venture, and thus, no service tax was leviable. This decision was based on the analysis of the joint venture agreement and the CBIC circular No.109/03/2009 dated 23/02/2009, which clarified that there was no relationship of service provider or service receiver between the parties to the joint venture agreement. 3. Revenue's Appeal and Tribunal's Analysis: The Revenue's appeal argued that GGCPL provided services to BAPL's clients, promoting BAPL's business, and thus earned consideration under the joint venture agreement, making it liable for service tax under BAS. However, the Tribunal examined the joint venture agreement and relevant legal provisions, including the definition of taxable service under Section 65(105)(zzb) of the Finance Act, 1994. The Tribunal noted that the joint venture agreement stipulated the sharing of Gross Wins in a 55:45 ratio between GGCPL and BAPL, with no separate consideration for any service provided. 4. Precedents and Circulars: The Tribunal referred to previous decisions, such as the cases involving Sir Ganga Ram Hospital and the show cause notice issued to BAPL, where it was held that similar arrangements did not constitute a service provider-service receiver relationship. The Tribunal also relied on the CBIC circulars, which supported the view that no service tax liability arises in such joint venture agreements where profits are shared without a distinct service being provided. 5. Tribunal's Conclusion: The Tribunal upheld the adjudicating authority's decision, finding no merit in the Revenue's appeal. It affirmed that the joint venture agreement did not create a service provider-service receiver relationship and that the shared profits did not constitute consideration for any taxable service. Consequently, the Tribunal dismissed the Revenue's appeal and disposed of the cross-objection filed by the respondent. Final Order: The appeal filed by the Revenue was dismissed, and the adjudicating authority's order dropping the service tax demand was upheld. The cross-objection filed by the respondent was disposed of, with the operative portion of the order pronounced in open court.
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