2023 (5) TMI 101 - HC - Service Tax

Non-payment of Service Tax - apportioned upfront fee received by the respondent-corporation of Rs. 35 Crore - this amount had been accepted before the agreement dated 12.01.2007 - whether same amount of Rs. 35 crore, which was received by the respondent-corporation at Mumbai before the agreement dated 12.01.2007, can be made basis to issue the impugned show cause notice dated 11.10.2011? HELD THAT - The answer to this question would be in the negative, as the jurisdiction to issue this notice was with the Raigad Commissionerate, which had already set aside the notice vide order dated 30.04.2014 (Annexure A-5). Rather, apart from notice dated 11.10.2011, two more notices dated 25.01.2011 and 10.10.2012 have also been set aside. The above said three notices were issued for the period from January, 2007 to March, 2012. The argument raised by learned counsel for the appellant that the Tribunal has only observed with respect to the notice dated 11.10.2011, has no merit, because as per order dated 30.01.2014 (Annexure A-5), all the three notices have been set aside. Thus, no ground is made out to interfere in the impugned order as the same has been passed after appreciating the evidence in the right perspective. No substantial question of law arises for consideration in this appeal. Appeal dismissed.

Summary

Issues:
1. Service tax demand under "Renting of Immovable Property Service"
2. Res judicata principle application in service tax demand
3. Jurisdictional authority for service tax demand

Analysis:

1. The case involved an appeal under Section 35 G of the Central Excise Act, 1944 against a final order passed by the Customs, Excise and Service Tax Appellate Tribunal. The dispute arose from the service tax demand made on a corporation for renting out a Container Freight Station (CFS) under the category of "Renting of Immovable Property Service." The corporation had received an upfront fee of Rs. 35 crore along with an annual fee of Rs. 10 crore from another party, and the service tax was paid only on the annual fee, not on the upfront fee. A show cause notice was issued, service tax demand was confirmed, and a penalty was imposed. The Tribunal allowed the appeal, stating that the demand for service tax on the upfront fee was against the principles of res judicata as a previous notice had already determined that the services did not fall under "Franchise Service."

2. The issue of res judicata was crucial in this case. The Tribunal found that the earlier notice had already determined that the services provided did not fall under "Franchise Service." The subsequent notice demanding service tax on the same upfront fee amount was considered against the principles of res judicata. The Tribunal held that since the services did not fall under the category of "Franchise Service," issuing another notice for service tax on the same amount was not justified. The application of res judicata principle was pivotal in determining the validity of the service tax demand and played a significant role in the Tribunal's decision to allow the appeal.

3. The jurisdictional authority for the service tax demand was also a key aspect of the case. The corporation had registered for service tax under "Renting of Immovable Property Services" at Chandigarh and had paid the service tax accordingly. The impugned show cause notices were issued by a different Commissionerate, leading to a jurisdictional challenge. The Tribunal considered the jurisdictional aspect and the previous orders setting aside show cause notices issued by a different authority. The jurisdictional issue was crucial in determining the validity of the notices and the subsequent demand for service tax. The Tribunal's decision to dismiss the appeal was influenced by the jurisdictional discrepancies and the application of res judicata principle in the case.