2024 (3) TMI 1101 - AT - Service Tax

Levy of service tax - Business Support Service - service of providing up-linking facility - classification of service - services of supply of DSNG Van to its clients can be classified and subjected to service tax under the category of Supply of Tangible Goods Service or not - time limitation - demand of interest - levy of penalties u/s 77 78 of FA. Whether the service of providing up-linking facility will be taxable under the category of Business Support Service? - HELD THAT - On examination of the terms of the contract between the appellant and their client it is clearly evident that appellant have provided the services which support the business activities of their client, by providing the uplinking facility from their teleport. Thus on merits these service would be classifiable under the category of business support services. Whether the services of supply of DSNG Van to its clients can be classified and subjected to service tax under the category of Supply of Tangible Goods Service? - HELD THAT - The agreement between the appellant and their customer is from the day one i.e. the day when it was entered into, was an agreement to provide these vehicles on rent to the appellant without transferring the effective control and possession of the vehicle to the customers - Hon ble Supreme Court has in case of Adani Gases Ltd. 2020 (8) TMI 789 - SUPREME COURT held that the supply of the pipelines and the measurement equipment (SKID equipment) by the respondent, was of use to the customers and is taxable under Section 65 (105) (zzzzj) of the Finance Act 1994 - there are no merits in the submissions made by the appellant in this respect and hold that the appellant has in fact provided the service under the taxable category of the Supply of Tangible Goods Services. Whether the demand is barred by limitation? - HELD THAT - The issue involved is purely of interpretation of the terms of agreement vis a vis the provisions of the Act. On going through the terms of agreement, the appellant were entertaining a bona fide belief that these service would not be classifiable under any of the taxable categories. There is nothing in the agreement to show that appellant could not have entertained such a belief. Also it is found that there has been dispute in respect of interpretation of the term infrastructural support facility used in the definition of Business Support Services. There are decisions which have held that the this term was restricted only to infrastructural support facilities, vis a vis the office maintenance facilities which have been out sourced. Thus it cannot be said that appellants could not have entertained such a belief - thus, extended period of limitation could not have been invoked for making this demand. As the service tax is payable is under this category thus the demand will be restricted only to the extent it has been made within the normal period of limitation. To re-determine the same the matter needs to remanded back to the original authority. Whether the penalties imposed under Section 77 78 can be justified? - HELD THAT - As it is held invocation of extended period of limitation in respect of the demand made under the category of Business Support Services, the penalty imposed under Section in respect of this demand cannot be sustained. However in respect of the demand under category of Supply of Tangible Goods Services by invoking extended period of limitation as per proviso to Section 73 (1), which is upheld the penalty under Section 78 to that extent is upheld. Interest - HELD THAT - The demand for interest also upheld in respect of demands upheld. Appeal allowed in part.

Summary

Issues Involved:
1. Taxability of up-linking facility under "Business Support Service".
2. Taxability of supply of DSNG Van under "Supply of Tangible Goods Service".
3. Applicability of extended period of limitation.
4. Justification of penalties under Section 77 & 78.

Summary:

1. Taxability of Up-linking Facility under "Business Support Service":
The appellant provided up-linking services to broadcasters through a teleport hub. The Commissioner held that these services fall under "Business Support Service" as they provide infrastructural support essential for broadcasting. The tribunal upheld this classification, interpreting the definition of "Business Support Services" to include such infrastructural support, despite the appellant's reliance on case law suggesting otherwise.

2. Taxability of Supply of DSNG Van under "Supply of Tangible Goods Service":
The appellant rented out DSNG vehicles to customers. The Commissioner classified this under "Supply of Tangible Goods Service" as the agreement indicated that no right, ownership, title, or interest in the DSNG Vehicle passed to the customer. The tribunal upheld this classification, noting that the agreement clearly indicated a rental arrangement without transferring effective control and possession to the customer.

3. Applicability of Extended Period of Limitation:
For the up-linking facility, the tribunal found that the issue involved interpretation of legal provisions, and the appellant could have entertained a bona fide belief that service tax was not applicable. Therefore, the extended period of limitation could not be invoked, and the demand was restricted to the normal period of limitation. The matter was remanded for re-determination of the demand for the normal period.

For the DSNG vehicle rental service, the tribunal upheld the invocation of the extended period of limitation, stating that the agreement clearly indicated a rental arrangement, and the appellant could not have entertained a bona fide belief that service tax was not applicable.

4. Justification of Penalties under Section 77 & 78:
The tribunal set aside the penalty under Section 78 for the up-linking facility due to the bona fide belief regarding taxability. However, it upheld the penalty under Section 78 for the DSNG vehicle rental service, as the appellant was found to have suppressed facts with the intent to evade payment of service tax. The demand for interest under Section 75 was also upheld.

Final Decision:
The appeal was partly allowed. The demand and penalty related to the up-linking facility were set aside for the extended period and remanded for re-determination for the normal period. The demand and penalty related to the DSNG vehicle rental service were upheld. The demand for interest was upheld.