2024 (11) TMI 347 - AT - Service Tax

Refund claim in respect of service tax paid for services provided to their milk unions during the period 01.04.2014 to 30.06.2014 on 27.03.2015 - HELD THAT - The present refund application pertains to the period when the negative list regime was in force, where the levy of service tax u/s 66B required the presence of a 'service' as defined u/s 65B(44) of the Act. In order for a transaction to qualify as a 'service', it is the prerequisite that there is a service provider, a service recipient and 'consideration'. In the present case, we observe that the Appellant had rendered services to milk unions in the nature of promotion, marketing, business analysis, etc. Against these services, the Appellant collected a service fee on which service tax was discharged on the applicable rate. On account of an AGM and resulting order dated 13.10.2014, the service fee was entirely waived on a retrospective basis for the period 01.04.2014 to 30.06.2014. Pursuant thereto the Appellant refunded the entire service fee to the milk unions along with the service tax recovered from them. There is no dispute on this fact. The present refund of service tax paid by the Appellant was filed on account of such waiver of consideration. Once the consideration (service fee) was refunded by the Appellant to the milk unions, the transaction between the two parties no longer qualified as a 'service' and no service tax would be leviable thereupon. Prior to the waiver of service fee, the activities undertaken by the Appellant qualified as a taxable service in terms of Section 65B(44) of the Act, wherein the Appellant carried on the promotion, marketing, analysis, etc, of the business of the milk unions. Appellant also discharged service tax on the service fee received from the milk unions. Since, preceding the full waiver of service fee, there is no dispute that the Appellant was rendering a 'service' to the milk unions and that post waiver the appellant has issued credit notes to all milk union members for the amount of service tax as was collected from them, the appeal the service tax so paid is refundable to the appellant.

Summary

Issues:
Refund claim for service tax paid by the appellant on services provided to milk unions during a specific period. Department's rejection of the refund claim based on noncompliance of statutory provisions. Appeal against the rejection of the refund claim.

Analysis:
The appellant, a cooperative dairy federation, filed a refund claim for service tax paid on services provided to milk unions during a particular period. The department observed that the appellant sought a refund of service tax paid on the taxable value charged as service fee from the milk unions. However, a decision made during an Annual General Meeting unanimously decided to waive the service fee charged from the milk unions for the specified period. The department issued a Show Cause Notice proposing to reject the refund claim based on noncompliance with statutory provisions, including the Central Excise Act and Service Tax Rules.

The department's proposal to reject the refund claim was accepted through an Order-in-Original and an appeal against this order was dismissed. The appellant argued that the service tax was discharged under the Finance Act, 1944, for services rendered to milk unions. They contended that the waiver of service fee constituted a renegotiation of the invoice value, resulting in the refund claim. The appellant maintained that the transaction did not qualify as a service, justifying the refund claim under relevant statutory provisions.

Upon hearing both parties, the tribunal observed that the waiver of service fee amounted to a renegotiation of the invoice value, changing it from a fixed amount to nil. The tribunal noted that the waiver was a result of an AGM decision and constituted an amendment to the service contract. The tribunal analyzed the definition of 'service' under the relevant Act, emphasizing the presence of a service provider, a service recipient, and consideration for a transaction to qualify as a service.

The tribunal concluded that once the consideration (service fee) was refunded to the milk unions, the transaction no longer qualified as a service, exempting it from service tax liability. Citing precedents, the tribunal affirmed that service tax is chargeable only when services are provided against consideration. The tribunal acknowledged that prior to the waiver, the appellant's activities constituted taxable services, but post-waiver, the appeal for a refund of service tax was deemed allowable. Consequently, the tribunal set aside the order rejecting the refund claim and allowed the appeal.