2024 (10) TMI 11 - AT - Service Tax

Levy of Service tax - Support Services of Business or Commerce - Adda Fees - Levy of service tax - Manpower Recruitment Agency - undertaking work allotted by M/s Faridkot Co-op. Milk Producer Union Ltd., Firozpur, Punjab Health System Corporation Ltd., Civil Hospital, Kotkapura and Faridkot etc - appellant could not submit any records or documents to prove the same - Levy of service tax on Renting of Immovable Property on the basis of miscellaneous income of Rs.10,32,070/- for the year 2010-11 - Extended period of limitation. Levy of Service tax - Support Services of Business or Commerce - Adda Fees - HELD THAT - On going through the contract with the Punjab Roadways, the appellants are collecting the same. The appellants are paying a certain fixed sum to the Government. They are retaining the entire amount collected from the bus operators. In lieu of the consideration received from the bus operators, they are providing infrastructure for parking of the vehicles, roads, ticket counters, resting facilities etc. inside the premises - the contractors, who are undertaking the work with a commercial motive cannot be equated to a sovereign authority though operating in terms of a contract with the authority - the appellant is liable to pay service tax on this account. Levy of service tax - Manpower Recruitment Agency - undertaking work allotted by M/s Faridkot Co-op. Milk Producer Union Ltd., Firozpur, Punjab Health System Corporation Ltd., Civil Hospital, Kotkapura and Faridkot etc - appellant could not submit any records or documents to prove the same - HELD THAT - The appellant has been denied an opportunity to represent their case with whatever evidence they could have obtained. To that extent, we find that the impugned proceedings are vitiated. Moreover, it is opined that the entire demand in this category cannot be confirmed on the basis of a single contract or invoice; it was incumbent upon the Department that they prove that the liability to service tax with evidence after giving due opportunity to the appellants in following the principles of natural justice. Such procedure not being followed, the confirmation of demand on this count cannot be sustained. Levy of service tax on Renting of Immovable Property on the basis of miscellaneous income of Rs.10,32,070/- for the year 2010-11 - HELD THAT - The Department has not established as to the payer/ service recipient of the amount. It is opined that unless all elements i.e. service provider, service receiver, the service provided and the remuneration received are established, demand of service tax cannot be sustained. Coming to demand of service tax on Management, Maintenance and Repair Service , it is found that the appellant submits that they have undertaken the work with respect to construction of roads/ railways and not in respect of any commercial enterprise and the same is exempt vide Notification No.24/2009 - the Department did not controvert the submissions of the appellants and have not established as to which was the specific work they have undertaken. Effort has been made to confirm the demand on the basis of entries in the books of accounts - such a confirmation is not acceptable. Extended period of limitation - HELD THAT - The appellant not being a sovereign authority, the ratio of the judgment is not applicable, it goes to establish the bona fides of the appellants and shows that there were reasons for the appellant to entertain a doubt as to whether the Adda Fees was taxable. It is also found that most of the demand is based on the books of accounts without establishing the service, the service recipient and the consideration - the Department has not made out any case for the invocation of extended period. Under the circumstances, though, the appellant is liable to pay service tax on the Adda Fees, the demand on the same is liable to be restricted to the normal period of limitation. The appeal is partly allowed by way of remand to the Adjudicating Authority.

Issues Involved:
1. Demand of service tax on "Support Services of Business or Commerce" (Adda Fees).
2. Demand of service tax on "Manpower Recruitment and Supply Service".
3. Demand of service tax on "Renting of Immovable Property".
4. Demand of service tax on "Management, Maintenance and Repair Service".
5. Invocation of extended period for demand.
6. Entitlement to benefits of CENVAT credit and small-scale exemption.
7. Imposition of penalties.

Issue-wise Detailed Analysis:

1. Demand of service tax on "Support Services of Business or Commerce" (Adda Fees):
The appellants were collecting Adda Fees from bus operators for providing infrastructure such as parking, roads, and ticket counters. The Department contended that these services constituted "Business Support Services" and were taxable. The appellants argued that the fees were a statutory levy under the Road Transport Corporation Act, 1950, and not for infrastructure support. The Tribunal found that the appellants were operating with a commercial motive and retaining the entire amount collected from bus operators, thus liable to pay service tax on Adda Fees. However, the demand was restricted to the normal period of limitation, and the appellants were entitled to the benefit of CENVAT credit.

2. Demand of service tax on "Manpower Recruitment and Supply Service":
The appellants provided manpower services to various entities but claimed they charged on a per-contract basis, not per-person. The Department relied on certain documents to establish the service tax liability, but these documents were not supplied to the appellants, denying them the opportunity to represent their case. The Tribunal held that the confirmation of demand on this count could not be sustained due to the lack of evidence and violation of natural justice principles.

3. Demand of service tax on "Renting of Immovable Property":
The Department demanded service tax based on miscellaneous income shown under the head "Rent" for the year 2010-11. The Tribunal found that the Department had not established the service provider, service receiver, service provided, and remuneration received, thus the demand could not be sustained. However, the demand for the amount already paid by the appellants before the issuance of the Show Cause Notice was confirmed along with interest.

4. Demand of service tax on "Management, Maintenance and Repair Service":
The appellants claimed that the work performed was related to roads and railways, exempt under Notification No.24/2009-ST. The Department did not counter this claim or establish the specific work undertaken. The Tribunal found that the demand could not be confirmed based on book entries alone and set aside the demand.

5. Invocation of extended period for demand:
The Tribunal found that the invocation of the extended period was not justified. The appellants had reasons to believe their activities were not taxable, supported by Tribunal and Commissioner (Appeals) decisions. The demand was primarily based on book entries without establishing the service details, thus the extended period could not be invoked.

6. Entitlement to benefits of CENVAT credit and small-scale exemption:
The Tribunal held that the appellants were entitled to the benefits of CENVAT credit and small-scale exemption under Notification No.06/2005-ST. These benefits could not be denied to them.

7. Imposition of penalties:
All penalties imposed under Sections 77 and 78 were set aside by the Tribunal.

Conclusion:
The appeal was partly allowed by way of remand to the Adjudicating Authority with specific directions:
(i) Confirming the service tax demand on Adda Fees for the normal period with entitlement to CENVAT credit.
(ii) Setting aside the demand on Manpower Recruitment and Supply Service and Management, Maintenance and Repair Service.
(iii) Confirming the demand on Renting of Immovable Property and Sale of Space for Advertisement along with interest, with the appellants required to pay interest if not paid earlier.
(iv) Setting aside all penalties.

(Order pronounced in the open court on 27/09/2024)

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