2012 (12) TMI 137 - AT - Service Tax

Business auxiliary services - Held that - goodwill for transfer of fly ash business has been fixed at ₹ 4,21,34,400/- and the consideration is paid to SSE&C @ ₹ 30/- per ton of pozzocrete produced by M/s. Dirk India Ltd. The said agreement also says that the contract for fly ash collection from NTPS to MSEB for M/s. Dirk India Ltd. in the name of SS Engineers & Contractors will continue as usual as per the separate contract already signed. Thus, it is evident that there are two contracts - One for transfer of business goodwill and the other for collection, delivery and handling of fly ash on which service tax liability is being discharged. By no stretch imagination, payment of goodwill on transfer of business can come under the category of business auxiliary services; therefore,no merit in the Revenue s appeal - Accordingly, the appeal is dismissed as devoid of merits - cross objection is also disposed of.

Summary

Issues:
1. Whether the amount received for transfer of goodwill is chargeable to service tax under business auxiliary service.
2. Whether the income received from a client for services rendered is only towards commission and not goodwill.

Analysis:

Issue 1:
The appeal was filed by the Revenue against the Order-in-Appeal passed by the Commissioner of Central Excise & Customs, Nashik, regarding the service tax liability on the amount received for the transfer of goodwill. The respondent had entered into agreements with a client for the transfer of goodwill and for the collection, delivery, and handling of fly ash. The Revenue contended that the amount received for goodwill transfer should be chargeable to service tax under business auxiliary service. A show-cause notice was issued demanding service tax, interest, and penalty. However, the Commissioner (Appeals) allowed the appeal, stating that the amount received for goodwill transfer is not leviable to service tax under business auxiliary service. The Revenue appealed against this decision.

Issue 2:
The Revenue argued that the income received from the client was only towards commission for services rendered and not towards goodwill. The respondent contended that the amount received was for two purposes: one for services rendered, on which service tax liability was discharged, and the other towards royalty as per the agreement. The Revenue claimed that the respondent changed the accounting head to evade service tax. The Tribunal examined the agreements and found that there were separate contracts for the transfer of business goodwill and for services rendered. The agreement clearly outlined the consideration for goodwill transfer and the services provided. The Tribunal concluded that the payment for goodwill transfer cannot be categorized as business auxiliary services, and hence, dismissed the appeal as devoid of merits.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the Revenue's appeal, stating that the payment for the transfer of business goodwill does not fall under the category of business auxiliary services for service tax liability. The Tribunal also disposed of the cross objection filed by the respondent, affirming that the amount received was for separate purposes as per the agreements.