2010 (12) TMI 40 - AT - Service Tax

Promotion of logo business auxiliary service (BAS) - the Agreement dated 30.3.1995 was entered into between Sahara Corporation and the appellants in order to promote business of Sahara Corporation by the appellants and accordingly, the business activity of Sahara Corporation in relation to housing and real estate projects was sought to be promoted and publicized by printing logo of Sahara Corporation on the air tickets, boarding passes, baggage tags and publicity materials and advertisement in newspaper holding, etc Held that - If the construction or development activity amounts to render service which would qualify the same to be one in respect of which some other person or entity can conduct the activity of the nature of Business Auxiliary Service for the purpose of attracting the provision of Section 65(19)(ii) of the said Act, was intended to be the charge against the appellants to bring them in the net of service tax under the said provision of law, obviously, it was necessary for the department to lay necessary factual foundation in that regard in the show cause notice. Order traveled beyond the scope of SCN Unless the service recipient is shown to have been engaged in rendering some service to others and the service provider is shown to have rendered his service for promotion or marketing of such service provided by the service recipient to others, the question of creating liability under the said Act in terms of Section 65(19) (ii) read with 65(105) ( zzb ) of the said Act does not arise. - the allegation or charge in that regard relates to the sale of immovable properties or the developed properties or the constructed project by Sahara Corporation. It does not relate to any service rendered by Sahara Corporation to others in relation to the sale of such properties or projects. Merely because the debit notes speak of charges being paid for the services according to the agreement between the parties that by itself would not be sufficient to conclude that the activity in the form of display of logo would be the business auxiliary services within the meaning of the said expression, unless it is established that the activity of Sahara Corporation is service to others and the activity of display of logo has resulted in promotion and advertisement of such service of Sahara Corporation The brand promotion was not included in the category of business auxiliary services prior to the said date. It is settled law that the charge created by introducing a new entry and consequently taxability thereupon, the question of imposing the duty retrospectively does not arise. The statutory provision did not provide brand promotion to be a taxable service during the relevant period. Extended period of five years is not to be invoked unless there is something more positive then mere inaction or failure on the part of the assessee or conscious or deliberate withholding of information.

Issues Involved:
1. Scope of the Show Cause Notice.
2. Classification under "Business Auxiliary Services".
3. Applicability of subsequent entries for brand promotion and sale of space.
4. Territorial jurisdiction of the authority issuing the show cause notice.
5. Bar of limitation and invocation of extended period.
6. Justification for demand of interest.
7. Imposition of penalty.

Detailed Analysis:

1. Scope of the Show Cause Notice:
The appellants contended that the Commissioner exceeded the scope of the show cause notice. The show cause notice was based on an agreement dated 30.3.1995, which indicated that the appellants were to promote the business of Sahara Corporation by displaying their logo on various materials. The Commissioner's findings that construction and development of immovable properties constituted services and that Sahara Corporation was providing numerous other services were beyond the scope of the show cause notice. The show cause notice did not allege that real estate activities amounted to services as understood in common parlance or establish from the Handbook of Procedure for Foreign Trade.

2. Classification under "Business Auxiliary Services":
The core issue was whether the services rendered by the appellants to Sahara Corporation fell under "Business Auxiliary Services" as defined under Section 65(19)(ii) of the Finance Act, 1994. The appellants argued that Sahara Corporation's activities of construction and sale of immovable properties did not amount to services. The department failed to establish that Sahara Corporation was engaged in rendering services to others, which the appellants were promoting. The display of the logo alone did not amount to rendering "Business Auxiliary Services" as it did not promote or market any specific service provided by Sahara Corporation. The Tribunal held that the activity of Sahara Corporation did not involve rendering services to others and thus, the appellants' activities did not fall within "Business Auxiliary Services".

3. Applicability of Subsequent Entries for Brand Promotion and Sale of Space:
The Tribunal noted that the entries for brand promotion and sale of space were introduced after the relevant period. The entry for brand promotion was introduced on 16.5.2008, and the entry for sale of space was introduced in 2006. The Tribunal held that these entries could not be applied retrospectively to the appellants' activities during the relevant period. The introduction of these specific entries indicated that such activities were not covered under the earlier general entry of "Business Auxiliary Services".

4. Territorial Jurisdiction of the Authority Issuing the Show Cause Notice:
The appellants contended that the show cause notice was issued without jurisdiction as they were not registered in Delhi during the relevant period. The Tribunal did not find it necessary to address this issue in detail due to the conclusions on the primary issues.

5. Bar of Limitation and Invocation of Extended Period:
The appellants argued that the show cause notice was time-barred and there was no justification for invoking the extended period of limitation. The Tribunal did not delve into this issue due to the conclusions on the primary issues.

6. Justification for Demand of Interest:
The Tribunal did not find it necessary to address the issue of interest due to the conclusions on the primary issues.

7. Imposition of Penalty:
The appellants contended that they were under a bona fide belief that their activities did not amount to rendering services and hence, no penalty should be imposed. The Tribunal did not address this issue in detail due to the conclusions on the primary issues.

Conclusion:
The Tribunal concluded that the appellants' activities did not fall within the category of "Business Auxiliary Services" under the Finance Act, 1994, during the relevant period. The display of the logo did not amount to promoting or marketing any service provided by Sahara Corporation. The introduction of specific entries for brand promotion and sale of space indicated that such activities were not covered under the earlier general entry. Consequently, the demand for service tax, interest, and penalty was quashed and set aside. The appeal was allowed with consequential relief.

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