2024 (3) TMI 1231 - AT - Service Tax

Levy of service tax - Business Support Service - joint venture - setting up clean development mechanism electricity (CDM) Co-generation plant of 20 MW on Build, Own, Operate and Transfer (BOOT) basis to improve energy efficiency and to reduce steam consumption - HELD THAT - On going through the definition of the taxable service it appears that the term Infrastructure Support Service includes providing of office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services etc. A clear takeaway from the definition of Business Support Service is that it is in the nature of outsourced work which necessarily presupposes deployment of services as well as personnel to help the business of the other person. In the instant case, no such outsourcing of work by M/s a2z Ltd to the appellant is visible. It is clear from the wordings of the definition that one party, the provider of the service should render service to support the business of the other party, that is the recipient of the service. However, in the instant case, it is found that no such arrangement is visible. The MOU between the appellants and the M/s a2z is on a principal-to-principal basis and not on the basis of a service provider and the client. We find that while rendering a service may result in the payment of a consideration, monetary or otherwise, the vice versa is not true. Department seriously erred in viewing every consideration to be necessarily for rendering a service. On going through the provisions of the statute, board s clarification and the terms of the MOU, it is opined that deposit of Rs. 50,00,000/- received by the appellants from M/s a2z is not any consideration for the provision of any service. The nature of relationship between the appellant and M/s a2z is on the principal-to-principal basis and therefore, similar to a Joint Venture . The arrangement is mutually beneficial. The impugned order does not stand the scrutiny of law and therefore is not legally maintainable and requires to be set aside - Appeal allowed.

Summary

Issues involved: Interpretation of service tax liability u/s Business Support Service for infrastructural support provided in a joint venture agreement.

Summary:
The case involved M/s Fazilka Co-Op Sugar Mills Ltd, engaged in a joint venture with M/s a2z Infrastructure Pvt. Ltd. for setting up a CDM Co-generation plant. The dispute arose when the Revenue claimed that the appellants provided infrastructural support service to M/s a2z falling under "Business Support Service" without paying the applicable service tax. The appellants argued that the agreement was in the nature of a joint venture and no service provider-recipient relationship existed. The Revenue contended that the advance received constituted consideration for infrastructure service provided by the appellants.

The tribunal analyzed the agreement and definitions of Business Support Service, emphasizing that the provision of office utilities, secretarial services, etc., constitutes infrastructural support services. However, it noted that no outsourcing of work was visible in the case, and the agreement was mutually beneficial. The advance paid by M/s a2z was specifically for the modernization of the sugar plant and not for any service rendered by the appellants. The tribunal concluded that the relationship was on a principal-to-principal basis akin to a joint venture, and the impugned order did not stand legal scrutiny, allowing the appeal.

In conclusion, the tribunal held that the deposit received by the appellants was not consideration for any service provided, and the agreement was not based on a service provider-client relationship but was mutually beneficial. The order was set aside, and the appeal was allowed.