2017 (2) TMI 1176 - AT - Service Tax

Classification of service - Business Auxiliary Service or not? - Customer Care Services (inclusive of pantry, maintenance, security, housekeeping, hospitality, etc) to the occupants of the premises on behalf of their client, IHC - Sharing of revenue and expenses - The Gross Operating Receipt (GOR) obtained from the facilities are to be shared between the contracting parties viz. the appellant and IHC, in a fixed percentage - agreement lists out expenses to be reimbursed by IHC subject to a ceiling of 10% of GOR. Held that - such arrangement is not liable to service tax under BAS. The overall scope of the agreement indicates that it is not for rendering of service by one to another. Rather a common pool of resources required for running and maintaining the facilities of IHC successfully was attempted in terms of the agreement and the gross revenue is also shared showing the common intent. For such situation, we do not find a service provider service recipient relationship liable to service tax. Looking at it in another angle, it can be seen that even if there is promotion of business of facilities of IHC, as already noted, the increased income is always shared by both the parties. In such situation, it will involve self service also. Admittedly, any promotion or marketing of IHC facilities will directly benefit the appellant as GOR is shared. Mandap keeper service - benefit of abatement - Held that - the appellant is eligible for abated rate of duty as they have reversed the cenvat credit availed during the material time, fully. As such, the bar on claiming on such exemption is no more applicable. Appeal allowed - decided in favor of appellant.

Issues Involved:

1. Liability of the appellant to pay service tax under "Business Auxiliary Service" (BAS).
2. Appellant's entitlement for abatement under notification no. 1/06-ST dated 1.3.2006 for "Mandap Keeper Service".
3. Imposition of penalties under Section 76, 77, and 78.

Issue-wise Detailed Analysis:

1. Liability of the appellant to pay service tax under "Business Auxiliary Service" (BAS):

The main dispute centered on whether the appellant was liable to pay service tax under BAS for the amounts received from India Habitat Centre (IHC) for managing and operating hospitality and conference facilities. The appellant argued that they did not render any service to IHC under the agreement dated 2.8.97. Instead, the agreement was for combined management of the facilities with expertise provided by the appellant, and the gross consideration was shared between the appellant and IHC. The expenses incurred by the appellant were reimbursed by IHC without any mark-up, and thus, there was no service element involved.

The Tribunal examined the agreement and noted that both IHC and the appellant were involved in providing various facilities at IHC's premises. The agreement detailed the responsibilities of both parties, and the appellant's share of the Gross Operating Receipt (GOR) was not the subject of the service tax liability. The service tax liability was on the expenses reimbursed by IHC to the appellant. The Tribunal concluded that the arrangement was more akin to a co-venture agreement with shared responsibilities and revenue, rather than a service provider-service recipient relationship. Therefore, the Tribunal held that the appellant was not liable to pay service tax under BAS.

2. Appellant's entitlement for abatement under notification no. 1/06-ST dated 1.3.2006 for "Mandap Keeper Service":

The appellant claimed entitlement for abatement under notification no. 1/06-ST despite having availed cenvat credit on inputs and input services. The appellant reversed the disputed cenvat credit along with interest on 20.09.2013. The Tribunal referred to the decisions of the Hon'ble Supreme Court in Chandarpur Magnet Wires Pvt. Ltd. and the larger bench of the Tribunal in Franco Italian Co. Pvt. Ltd., which supported the appellant's claim for abatement upon reversal of cenvat credit. The Tribunal also noted the decision of the Allahabad High Court in Hello Mineral Water Pvt. Ltd., which allowed the concession under the notification considering the reversal of credit at the Tribunal's stage. Consequently, the Tribunal held that the appellant was entitled to abatement under notification no. 1/06-ST.

3. Imposition of penalties under Section 76, 77, and 78:

The Adjudicating Authority had imposed various penalties under Section 76, 77, and 78. However, given the Tribunal's findings that the appellant was not liable to pay service tax under BAS and was entitled to abatement under notification no. 1/06-ST, the penalties imposed were also set aside.

Conclusion:

The Tribunal found that the impugned orders were not legally sustainable. The appellant was not liable to pay service tax under BAS, was entitled to abatement under notification no. 1/06-ST, and the penalties imposed were set aside. The appeals were allowed, and the impugned orders were set aside.

← Previous Next →