2014 (9) TMI 696 - AT - Service Tax

Waiver of pre-deposit - Classification of services - Business Auxiliary Service or repair and maintenance service - development of the infrastructure as agreed upon apart from furniture, fixtures, furnishings and equipment internal maintenance of common areas, maintenance, replacement of capital equipments, etc - Availing Cenvat Credit while availing benefit of abatement Notification No. 1/2006-S.T. - Held that - The petitioner is the licensee of the premises and expenses are incurred for the upkeep and efficient use of the licensed premises. Prima facie these activities would not therefore amount to provision of Business Auxiliary Services, for or on behalf of IHC. On this analysis, the petitioner has made out a strong prima facie case, in respect of Service Tax assessed on Business Auxiliary Service. Regarding cenvat credit - Held that - it is asserted that since the credit availed has been reversed though subsequently, the petitioner would be entitled to the benefit of abatement under Notification No. 1/2006-S.T., which was denied by the adjudicating authority. Prima facie case is in favor of assessee - stay granted.

Summary

Issues:
Service Tax demand on Business Auxiliary Service provided to India Habitat Centre (IHC) during a specific period, denial of abatement claimed by the petitioner under Notification No. 1/2006-S.T., interest and penalties imposed, interpretation of agreement terms, classification of activities as Business Auxiliary Service, entitlement to abatement benefit.

Analysis:
The judgment revolves around a Service Tax demand confirmed by the Ld. Commissioner, Central Excise, on the petitioner for providing Business Auxiliary Service to India Habitat Centre (IHC) during a particular period. The demand included Service Tax on the service provided and denial of abatement claimed under Notification No. 1/2006-S.T. The Authority also imposed interest and penalties, including a penalty equivalent to the tax liability assessed under Section 78 of the Finance Act, 1994. The key issue was the denial of abatement due to the petitioner availing Cenvat credit for certain inputs and input services related to the output service provided, as per the terms of the agreement. The judgment delves into the interpretation of the agreement terms to determine the nature of services provided and the applicability of Business Auxiliary Service classification.

The agreement between the petitioner and IHC outlined the responsibilities and obligations of both parties. The petitioner was licensed to operate and manage hospitality and conference facilities at IHC premises, with obligations including maintenance, operation, and management of the facilities. The agreement specified the sharing of gross operating receipts between the parties, indicating the nature of their financial arrangement. The clauses in the agreement detailed the division of responsibilities, expenses, and revenue sharing, providing a framework for understanding the nature of the services provided by the petitioner to IHC.

The judgment analyzed specific clauses of the agreement to ascertain the activities undertaken by the petitioner and their classification under Business Auxiliary Service. It was observed that the expenses incurred by the petitioner were primarily for the maintenance and upkeep of the licensed premises, aimed at providing amenities and facilities for members/customers. The court concluded that these activities did not prima facie fall within the ambit of Business Auxiliary Service under the relevant sections of the Act. The petitioner's role as a licensee authorized to carry out specified activities during the agreement's tenure influenced the classification of services provided.

Regarding the denial of abatement claimed under Notification No. 1/2006-S.T., the petitioner argued that since the availed credit was subsequently reversed, they were entitled to the abatement benefit. Citing relevant legal precedents, the petitioner contended for the benefit of abatement, which was denied by the adjudicating authority. The judgment granted waiver of pre-deposit in full and stayed further proceedings for the realization of the liability, pending the appeal's disposal. The decision was based on a holistic analysis of the agreement terms, classification of services, and entitlement to abatement benefits, ensuring a fair interpretation of the legal provisions and precedents cited.