9911796707
TMI Blog2010 (12) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... llants under Section 73 (1) of Finance Act, 1994 along with interest thereon in terms of Section 75 of the said Act. Equal amount of penalty has been imposed under Section 78, besides penalty of Rs.1,000/- under Section 77 of the said Act, 1994. 3. On the basis of information received by the Department that M/s Sahara Airlines Limited having its registered office at Dr. Gopaldas Bhawan , 28, Barakhamba Road, Delhi had provided taxable service in the category of Business Auxiliary Services to its group company M/s Sahara India Commercial Corporation Ltd. in terms of the Agreement dated 30.3.1995 but had not paid service tax in respect of the consideration received from the latter, for such services rendered by them, investigations were initiated. In the course of investigations, various documents came to be recovered and scrutinized, and various statements of the persons in the administration of the appellants company as well as in the service recipient company came be recorded. Pursuant to the said investigation, a show cause notice dated 28.10.2008 came to be issued to the appellants to bring them to the fold of levy of service tax under the said Act in respect of Business Auxili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uxiliary Services to Sahara Corporation has been rejected as also the plea of bar of limitation. It has been held that the appellants failed to produce any evidence to show as to how they had bona fide belief that the services provided by them to promote the business and area operation to Sahara Corporation was not taxable under the category of Business Auxiliary Services. The said findings have been arrived at by the learned Commissioner while answering the issues as to whether the appellants had provided taxable service under the category of Business Auxiliary Services, whether the extended period of limitation was invokable , whether the gross amount charged was to be considered as inclusive of service tax and whether the payment of interest was warranted. 5. The impugned order is sought to be challenged on several grounds. It is assailed on the ground that the findings arrived at by the learned Commissioner in the impugned order are beyond the scope of the show cause notice. The appellants merely displayed logo of the group of companies and the appellants were part of the said group and were not rendering any service to Sahara Corporation and in any case, the activities for wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n agreement dated 30.3.95 with Sahara Corporation to provide extensive publicity to the activity of Sahara Corporation to promote its business and area operation, in spite of the fact that, neither the agreement specified nor there is any evidence gathered on record to establish that the appellants had been providing any service for promoting or marketing in respect of any of the services provided by Sahara Corporation. The evidence, which has been relied upon to establish the actual activity carried on by the appellants is in the nature of display of logo on the tickets, boarding passes, baggage tags etc. and on the Aircraft, and copy of golf ball given as free gift using the said logo and copies of writing pads, newspaper advertisement using the said logo. According to the learned Senior Advocate bare reading of the impugned order along with show cause notice would disclose that the Commissioner clearly travelled beyond the scope of the said notice. The findings that the construction/development of immovable properties would constitute service and the said view gets support from Appendix X of Hand Book of Procedure of Foreign Trade, that the real estate services of construction/d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicating authority has travelled beyond the scope of show cause notice. Undoubtedly, the agreement is the basis for the activities carried out by the appellants as the service provider to Sahara Corporation who was the service recipient. He further submitted that proper reading of the entire agreement would make it absolutely clear that the same was for promoting the business activity of the Sahara Corporation and that was clearly reflected from the show cause notice. It is settled law that the intention of the party to a contract has to be gathered from the language used in the agreement and in the matter in hand, the agreement clearly disclosed the service for promoting of the business activities of Sahara Corporation. The records placed before the authorities clearly established that, besides the sale of immovable properties, Sahara Corporation was providing a number of services and the same is evident from the balance sheet of the said company. Besides, the said company is also registered with the Department for the purpose of service tax and as per the registration certificate issued in Delhi and Pune, the company can provide a number of services. He further submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no evidence on record to suggest that mere use of word Sahara amounted to promotion or marketing of the services to Sahara Corporation. He further submitted that the scope of entry Business Auxiliary Services as is found under Section 65 (105) (19) of the said Act relates to the services which has to be understood taking into consideration the clause (ii) of the said definition. It is apparent therefrom as to what types of promotion and marketing activities are to be classified as the business auxiliary services. It is specifically confined to the services provided by the client. In other words, unless there is service provided by the client to others and such service is promoted or marketed by the service provider, the activity of the service provider cannot be classified under the category of Business Auxiliary Services under the said Act. He further submitted that activities of construction and sale of immovable property do not amount to services under the said category under the said Act. Infrastructure and the real estate projects carried out by the Sahara Corporation do not qualify as the services at all. Drawing our attention to the letter dated 10.9.2004 of the Ministry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that the ratio of the decision of the Apex Court in the matter of K. Raheja Development Corporation vs. State of Karnataka reported in 2006 (3) STR 337 wherein it was held that the payment of construction made in advance amounted to work contract has been doubted and referred to Larger Bench by the Hon'ble Supreme Court in Larsen & Toubro Ltd. Vs. State of Karnataka reported in2008 (12) STR 257. Merely because Sahara Corporation is registered for different types of services for the purpose of service tax, that would not suffice to conclude that even sale of immovable property would amount to a service. Besides, mere display of logo cannot be regarded as rendering any service of promotion or marketing of any service provided by their client. There has essentially to be a service provided by the client and it is only thereupon question of promotion and marketing of such service could arise. 9. On the other hand, while countering the said argument, the DR submitted that plain reading of the agreement and the resolution of the company would disclose that the activity which was carried out by the Sahara Corporation was nothing but service and the same was specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought to be given by the appellants is accepted, it would defeat the very purpose of the provisions of law. Besides the fact that Sahara Corporation had been rendering service was clearly admitted in the various statements of the officers of appellants and of Sahara Corporation and none of those statements were ever retracted. The courts duty is to make the tariff provisions workable. The tax statutes are to be understood by referring to the plain language used therein and in such cases, the question of interpretation does not arise. He further submitted that no evidence was laid before the adjudicating authority to prove that use of logo was not helpful to market and for promotion of real estate business of Sahara Corporation. The sole object as envisaged by the agreement dated 30.3.95 was that of promotion of the services rendered by the client of the appellants. It is pertinent to note that the amount paid in consideration thereof varied according to the length of the flight and the long distant flight got higher remuneration as compared to the short distant flight and therefore, the exposer time to the marketing message was the key. The mere use of logo served no useful purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess auxiliary service did not mention the brand or logo promotion. There was neither any judgment on the said issue nor a Circular. There was no reason or basis or material available to form any view about coverage of mere display of logo by the entry relating to the business auxiliary services. There was neither suppression nor misstatement of any fact by the appellants. Incorrect mention of the date of opinion by Shri S. S. Gupta is wholly irrelevant in the matter, besides of being typographical mistake. Reliance is placed in the decision in the matter of Tamil Nadu Housing Board vs. Collector reported in 1994 (74) ELT 9 (SC) ; Lubri-Chem Industries Ltd. Vs. Collector reported in 1994 (73) ELT 257 (SC); Padmini Products vs. C.C.E . reported in 1989 (43) ELT 195; Gufic Pharma Pvt. Ltd. Vs C.C.E ., Vadodara reported in 1996 (85) ELT 67 maintained by the Supreme Court reported in 1997 (93) ELT 187; Cosmic Dye Chemical vs. C.C.E ., Bombay reported in 1995 (75) ELT 721. It is therefore, sought to be contended that there was no justification to invoke the longer period of limitation. 13. On the other hand, the DR has submitted that the appellants have not placed on record any fact whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to be established by the Department, it has produced the relevant evidence. 16. It is contended on behalf of the appellants that the show cause notice was without jurisdiction inasmuch as during the period in dispute the appellants were not registered in Delhi and did not have centralized registration and therefore, the Delhi Commissionerate could not have exercised the jurisdiction in respect of alleged obligation to pay the service tax in relation to the services stated to have been rendered beyond the territorial jurisdiction of the Delhi Commissionerate . On the other hand, the DR submitted that the appellants have obtained service tax registration at New Delhi and they are having registered office at New Delhi and therefore, there is no substance in the ground sought to be raised in the matter. 17. Lastly, the appellants seek to dispute the liability of interest and penalty. According to the appellants they were under bona fide belief that mere display of logo which was also similar to the appellants predecessors name would not amount to rendering any services and there existed a reasonable cause for the appellants not to pay service tax on such activity and hence no in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellants to M/s. Sahara Corporation would fall under the category of "Business Auxiliary Services" within the meaning of the said expression under the said Act? As a corollary to this issue, it would be necessary to consider whether the display of logo by itself would amount to rendering services within the meaning of the expression "Business Auxiliary Services" under the said Act? (iii) Whether the entries relating to brand promotion and sale of space having been introduced in the said Act subsequent to the relevant period, the appellant could be held to have rendered such services prior to the introduction of such entries in the said Act or whether such entries could be held to be forming part of the Business Auxiliary Services for the period prior to the introduction of such specific entries in the said Act? (iv) Whether the authority who issued the show cause notice lacked territorial jurisdiction to deal with the matter? (v) Whether the show cause notice was barred by limitation and there was no justification for invocation of extended period of limitation? (vi) Whether the demand for interest is justified? (vii) Whether the facts of the case warranted imposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... airlines Ltd. stated in his statement that Sahara Corporation was engaged in housing real estate and infrastructure business, that in the year 1993 Sahara Corporation had launched various projects of housing and real estate, and therefore, passengers of the appellants were targeted for sale of those projects and that it was thought to provide publicity of various projects through appellants and to increase the area of operation of Sahara Corporation and that the appellants were advertising the projects of Sahara Corporation, and therefore, it was decided to reimburse them in the form of certain amount per passenger ticket for the services provided by them. It was further observed in the show cause notice that Sahara Corporation was developing various real estate projects and for promotion of those projects they utilized the services of the appellants and paid them for the services rendered. In terms of the said agreement, the appellants displayed the logo of Sahara Corporation on various materials as agreed and received remuneration for the same from Sahara Corporation which was collected depending upon the number of persons traveled in the appellants airlines during the relevant p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in regard to the classification is held by the authority to be correct. 26. In Amrit Foods case, the Apex Court had quashed the proceedings in the absence of the ground being disclosed in the show cause notice as the duty liability was sought to be fastened on the basis of such non disclosed ground. 27. In Ballarpur Industries Limited case, the Apex Court held that it is well settled law that the show cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest. 28. Similarly, in Toyo Engineering India Ltd ., the Apex Court had held that the department cannot travel beyond the show cause notice. 29. Undoubtedly, the statements of various persons particularly of Shri R.S . Dubey , Shri O.P . Srivastava and Vandana Bhargava read in proper prospective would reveal that the Sahara Corporation was engaged in the business of development of immovable properties and in construction of projects. It is also clear from the records that the promotion of such activities was thought to be made through the appellants and their predecessor and for that purpose the agreement dated 30.03.1995 was entered into. In terms of the agreement, the logo of Sahara Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the same traveled beyond the scope of the show cause notice. 31. The appellants are also justified in making grievance about the finding of the Commissioner that Sahara Corporation was engaged not only in the sale of immovable properties and construction and development of projects but also in rendering number of other services. Not only the show cause notice was completely silent about the same, but even in the course of adjudication, apart from the certificate of registration for a number of services and the Memorandum and Article of Association disclosing scope for rendering various services by Sahara Corporation, no material has been placed on record which could show any activity by Sahara Corporation which could reveal rendering of any of those services by Sahara Corporation. 32. The show cause notice is essentially based on the agreement dated 30th March 1995. Undoubtedly, in support of charge, apart from the said agreement, various other documents and statements of various persons are relied upon. From all the materials on record it has been clearly established and, rather has been fairly conceded by the learned Advocate for the appellants, that the fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the relevant period. 34. In HPL Chemicals , the Apex Court had ruled that the classification of goods is a matter relating to chargeability and the burden of proof squarely lies upon the revenue. If the department intends to classify the goods under a particular heading or sub-heading different from that claimed by the assessee, the department has to adduce proper evidence and discharge the burden of proof. 35. The basis for the charge against the appellants and the main piece of evidence against them is the agreement dated 30.03.1995 which reads thus: "We refer to the discussions of the undersigned had with your Director, Shri Subrata Roy Sahara, on the above matter in several meetings. What we want your AirLines to do, is to give extensive publicity to our activities in order to promote our business and area of the operations. We confirm that the following arrangements have been arrived at with you by us: All your Aircrafts will have exactly the same logo and in the same colour as used by us and the same will be prominently displayed outside of both sides of each and every aircraft in the manner that the same is clearly visible to general public at least from the distanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also specified the manner in which such activity was required to be carried out by the appellants. The manner of promotion was to be by way of display of logo and distribution of brouchers apart from other arrangements which could be necessary to popularize the business of Sahara Corporation as would be intimated by Sahara Corporation and was required to be performed after mutual agreement in that regard. 37. It is the contention of the appellants that the terms regarding brouchers and other arrangements were never implemented. Though in the course of arguments the DR had sought to dispute the claim, we have not been pointed out any evidence which could reveal enforcement of both those terms. It should not be forgotten that the service tax is to be levied in relation to the service either provided or to be provided. Mere clause in agreement which discloses the intention of the parties for performance of some acts and deeds cannot be by itself lead to conclusion about enforcement of such clause unless some evidence in that regard is produced. Neither the impugned order refers to any such material which could reveal enforcement of those two terms nor any material on record has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oardings. In consideration thereof the appellants were entitled for Rs.1075 /- per passenger on long distance sector and Rs . 400/- per passenger on short distance sector. It is undisputed fact that such logo was accordingly displayed and amount was paid to the appellants. The amounts were revised upward from time to time. 41. As far as Memorandum and Articles of Association is concerned, it is not known as to how the same can establish the case of the department. Such memorandum can merely disclose the main objects which are required to be pursued by the company. It would certainly disclose various fields in which company can have its activities. That itself, however, would not disclose that the company was engaged in all those activities nor the same could disclose rendering of any service as such by the appellants. Besides, even assuming that company's objectives are to render services in the nature of development and construction of immoveable properties, it is necessary to establish that the activities carried out by the appellants were in the nature of rendering "service" for promoting and marketing of the service of development and construction of Sahara Corporation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been rendering the services of promoting and marketing of the services rendered by the Sahara Corporation. In that regard, attention was drawn to the letter dated 18.12.2007 by Shri R.S . Dubey to Senior Intelligence Officer, the Kanpur, letters dated 30.3.96, 30.6.98, 24.3.2000, 31.3.02, 23.3.04 and 25.3.04 by Sahara Corporation. The letters dated 23.6.08 by Shri R.S . Dubey , dated 14.7.08 by Shri O.P . Srivastava , dated 26.6.08 by Shri Saroj K. Dutta , dated 13.10.08 by Shri J.P. Tiwari , dated 17.12.08 by various authorized signatories of the appellants , dated 18.9.09 by Saroj K. Dutta , dated 26.5.08 also by Shri Saroj K. Dutta and letter the dated 3.1.08 by Shri R.S . Dubey were also relied and referred to. Besides, the attention was also drawn to the registration certificate of the appellants under the said Act, the opinion dated 4.8.03 by Shri S.S. Gupta, C.A. and to the details of payments made by Sahara Corporation to the appellants. 45. The letter dated 18.12.07 by Shri R.S.Dubey is merely in response to the letter to Senior Intelligence Officer, Kanpur asking certain information in the course of investigation. The letter dated 25.3.04 by Shri J.B.Roy is merely in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under reference carried out by Sahara Airlines Ltd. and further, that the appellants took over the management of Sahara Airlines Ltd. and therefore, could not be held liable for service tax of Sahara Airlines. 52. The letter dated 3.3.08 was in response to the letter sent to him by the investigating officer. 53. As far as the payment documents was concerned, they merely disclose the payments having been made in terms of the agreement and from time to time, there was a change in the quantum of amount payable under the agreement. 54. If we take into consideration all the above referred documents together they undoubtedly disclose the understanding which was arrived at between the appellants and Sahara Corporation for display of latters logo on various materials and for that purpose the appellants were to receive certain remuneration from Sahara Corporation and was accordingly paid by Sahara Corporation. Apart from the above documents, attention was drawn to the statements of various persons recorded in the course of investigation. 55. Shri O.P. Srivastava had stated in his statement dated 27.5.08 that Sahara Corporation was engaged in housing, real estate and infrastructure busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tedly agreed to display logo of Sahara Corporation on different items as specified in the agreement. Equally, it is established that the appellants were entitled to receive remuneration for rendering such service and the same was required to be calculated at a fixed agreed rate per passenger. The whole purpose of calculating the remuneration on the basis of number of passengers in the airlines was that the airlines passengers were to be targeted for sale of projects by Sahara Corporation. The project comprised of residential and commercial complexes. The parties had also agreed that there could be other arrangement to popularize the business of Sahara Corporation on intimation in that regard by Sahara Corporation and by way of mutual consent. Equally it is established that the appellants in furtherance of such agreement displayed the logo and to that extent were duly compensated by payment on the basis of number of passengers travelled in the airlines of the appellants. To that extent, certainly, the appellants were engaged in conducting some activity for Sahara Corporation. However, the question which calls for determination is whether such activity amounted to taxable service and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 64. The dispute in the case in hand essentially is whether the activities in the nature of development and construction and sale thereof to others by Sahara Corporation, for which the appellants had agreed for promotion and marketing thereof, were the services within the meaning of said expression under the said Act. It is the contention of the appellants that the activities carried out in the nature of development and construction by Sahara Corporation were not in the form of services to others but those were activities for their own benefit so that they could sell the developed or constructed properties and the sale of the properties do not include element of service. On the other hand, it is the contention of the department that such activities amount to render service to others and, hence, the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn benefit and they were merely selling the immovable properties either developed or constructed. The sale of immoveable properties do not involve service element and, therefore, there was no service as such rendered by Sahara Corporation for which the appellants had rendered service of promotion or marketing. If at all any activity of promotion and marketing was rendered by the appellants to Sahara Corporation, it was in respect of sale activities pertaining to immoveable properties of Sahara Corporation and that too by merely displaying the logo of the Sahara Corporation. Therefore, the same would not fall within the category of "Business Auxiliary Services" within the meaning of the said expression under the said Act. Heavy reliance is sought to be placed in that regard in the decision of Gauhati High Court in Magus Construction case as also of the Apex Court in the matter of Larsen & Tourbro . The contention is seriously disputed on behalf of the department. 67. It was sought to be contended that in view of undisputed facts and admissions on behalf of the appellants, it was not necessary for the department to place on record any material in support of their allegation about re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce does not involve supply of goods; "service" rather connotes transformation of use/user of goods as a result of voluntary intervention of "service" provider and is an intangible commodity in the form of human effort. To have "service", there must be a "service provider" rendering services to some other person(s), who shall be recipient of such "service". 30. Under the Finance Act, 1994, "service tax" is levied on "taxable service" only and not on "service provider". A service provider is only a means for deposit of the service tax to the credit of the Central Government. Although the term "service receiver" has not been defined in the Finance Act, 1994, the service receiver is a person, who receives or avails the services provided by a "service provider". 31. From the provisions of the law extracted hereinabove, it becomes abundantly clear that the burden of registration and payment of "service tax" is on the person, who provides "taxable service" to any person. According to the petitioner-company, it does not provide any "taxable service" to any person so as to warrant its registration under the Finance Act, 1994, and/or to pay any "service tax" thereunder. Any part of const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the circular aforementioned offers." (Emphasis supplied) 72. The Gauhati High Court thereafter also referred to a Circular dated 1.8.2006 issued by the Board and held thus: "37. The Central Board of Direct Taxes (sic) (C.B.E. & C.) has also, vide Circular No. 332/35/2006- TRU, dated August 1, 2006, clarified that if no person is engaged for construction work and the builder/promoter/developer undertakes construction work on its own without engaging the services of any other person, then, in such cases, in the absence of a relationship of "service provider" and "service recipient", the question of providing taxable service to any person by any other person does not arise. The relevant portion of the circular, dated August 1, 2006, is reproduced below : Sl. No. Issue Legal osition 1. Is "service tax" applicable on builder, promoter or developer who builds a residential complex with the services of his own staff and employing direct labour or petty labour contractors whose total bill does not increase 4.0 lacs in one financial year ? In a case where the builder, promoter or developer builds a residential complex, having more than 12 residential units, by engaging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn behalf but also on behalf of others who were prospective buyers. Reference was also made to the decision of the Allahabad High Court in Assotech Reality (P) Ltd. vs. State of U.P ., reported in 2007 (7) STR 129, wherein it was held that when the assessee construct flats/apartments not for and behalf of prospective allotees but otherwise, and the subject title and interest in the construction continues to remain with the assessee till the date of sale. 76. In Larsen & Toubros Ltd. case the Apex Court after considering the K. Raheja Development case observed that it was difficult to accept the proposition laid down in K. Raheja Development case and that the view taken in the said decision requires re-consideration by the Larger Bench. The matter stands referred to a Larger Bench. 77. The discussion on the point in issue would be incomplete without reference to some more decisions of the Apex Court, and they are Tamilnadu Kalyan Mandapam Association vs. Union of India reported in 2006 (3) STR 260, Fakir Chand Gulati vs. Uppal Agencies Private Limited reported in 2008 (12) STR 401, Home Solutions Retail India Limited vs. Union of India reported in 2009 (14) STR 433, Associat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer of undivided share in land to the builder and grant of permission to the builder to construct two or more floors. Apart from consideration flowing from the land owner to the builder in the form of sale of undivided share in the land and permission to construct and sell other floors of the building is to adjust the value to the extent of land to be transferred to the builder, the important aspect is the availment of services of the builder by the land owner for house construction for a consideration. To that extent, the land owner would be a consumer and the builder to be a service provider. 80. In Home Solution case, the point for consideration before the Apex Court [this was not a decision of the Apex Court but was that of the Delhi High Court-editor] was whether the Finance Act, 1994 envisages the levy of service tax on letting out / renting out of immovable property per se. The Apex Court after referring to various relevant provisions of the said Act as well as taking into consideration the various reported decisions including Kalyan Mandapam Association case held that the Supreme Court in Kalyan Mandapam case had held that the service of a Mandap Keeper does not involve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after taking note of various provisions of law observed that the Reserve Bank of India was constituted under RBI Act, 1934 inter-alia to regulate the country's monetary system. Chapter III-B of the RBI Act deals with the provision relating to non banking financial companies and financial institutions. Section 45-I(c) of RBI Act treats financing as an activity. Those activities are regulated by Reserve Bank of India. The expression financial institution means any non banking institution which carries on as its business and activity inter-alia of financing, whether by way of making loans or advances or otherwise. Under notification dated 2.1.1998, the deposit taking activities of non banking financial companies were also sought to be regulated. Similarly, under RBI guidelines dealing with the accounting for investments, the non banking financial companies having not less than 60% of the total assets in lease and higher purchase and deriving not less than 60% of their total income from such activities can be classified as higher purchase/ equipment leasing companies. The Apex Court further observed that the significance of the said circulars and guidelines is to show that the acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice receiver. It is this principle of equivalence which inbuilt into the concept of service tax under the Finance Act, 1994. That service tax is, therefore, a tax on an activity. That, service tax is a value added tax. The value addition is on account of the activity which provides value addition, for example, an activity undertaken by a Chartered Accountant or a broker is an activity undertaken by him based on his performance and skill. This is from the point of view of the professional. However, from the point of view of his client, the Chartered Accountant /broker is his service provider. The value addition comes in on account of the activity undertaken by the professional like tax planning, advising, consultation etc. It gives value addition to the goods manufactured or produced or sold. Thus, service tax is imposed every time service is rendered to the customer/ client." The Apex Court further held that "every tax may be levied on an object or on the event of taxation. Service tax is, thus, a tax on activity whereas sales tax is a tax on sale of a thing or goods." Having held so, it was also ruled that: "A contract of sale is different from an agreement to sell and un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ights may be "goods" for the purpose of levying sale tax, it was held that electromagnetic waves are neither abstracted nor are they consumed in the sense that they are not extinguished by their user. They are not delivered, stored or possessed. Nor are they marketable. They are merely the medium of communication, what is transmitted is not an electromagnetic wave but the signal through such means. The signals are generated by the subscribers themselves. In telecommunication what is transmitted is the message by means of the telegraph. No part of the telegraph itself is transferable or deliverable to the subscribers. It was ruled that "the electromagnetic waves are not 'goods' within the meaning of the word either in Article 366(12) or in the State Legislation". It was further observed that "it is not in the circumstances necessary for us to determine whether telephone system including the telephone exchange was not goods but immovable property as contended by some of the petitioners". It was further held that "a telephone service is nothing but a service. There is no sale element apart from obvious one relating to the hand set if any. That and any other accessory supplied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service provider to be taxable service, to establish the factum of rendering of any such service by the service recipient to others in the course of sale of the immovable property by such service recipient, and only then it could be said that the service provider had provided Business Auxiliary Service by promoting or marketing such services of the service recipient. Needless to say that to establish such facts, it is primarily necessary to have a clear charge in that regard with the factual foundation in the show cause notice to give proper and fair opportunity to the assessee to meet the case of the department and thereupon to establish such charge in the course of adjudication proceedings. As far as the case in hand is concerned, as already seen above in relation to the service aspect is concerned, 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. 87. The relevant material to support the allegation regarding rendering of business auxiliar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 contention that the appellants have not produced any evidence to show that logo did not promote the business is totally devoid of substance in as much as that the burden to prove the classification and to bring the assessee within the net of tax primarily lies upon the department. Failure of the department to establish the basic ingredient to prove the charge against the assessee can neither shift the burden, nor can give any advantage to the department. 89. Another important point sought to be canvassed relates to the entry relating to sale of space or time for advertisement and a brand promotion under entry 65(105) (zzzzq) and 65 (105) (zzm). It is sought to be argued that when a subsequent entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected to service tax under this head. The tax is limited only in case the service is provided by a commercial concern. Those, service provided by a labourer engaged directly by the property owner or a contractor who does not have a business establishment would not be subject to service tax." The contents of the above quoted para from the said letter apparently disclose that it was the understanding of the Government itself that if the builders construct the building or construct for themselves either for their own use or to rent it out or for selling it subsequently, then they do not render any taxable service as such. In other words the sale of an immovable property does not include service element and that is the understanding of the Government itself which is revealed from the said letter. 91. Equally the learned Advocate for the appellants is justified in referring to the Circular dated 26.02.2010. Therein under the caption "service tax on construction services" in para 8.2 it was stated thus:- "As regards payment made by the prospective buyers / flat owners, in few cases the entire consideration is paid after the residential complex has been fully developed. This is in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) of Section 65 of the Finance Act, 1994. One of them, namely promotion, marketing etc. of lottery and similar games of chance presently figures as part of Business Auxiliary Service (BAS). This is now being introduced as an independent entry in the list of taxable services" Referring to this observation, it is sought to be contended and not without justification that display of logo could not be said to be part of business auxiliary services as in relation to the display of logo there is a specific entry introduced under the amendment brought in the year 2010. Referring to the caption "promoting a brand of goods service even business entity etc. attention was drawn to para 4.2 of the said circular. Indeed it clearly states that "it is important to note that promotion or marketing of sale of goods produced, provided or belonging to a client and promotion or marketing of services provided by the client are already covered under the business auxiliary services. Such activities would continue to remain classified under BAS. The difference between the services classifiable under BAS and the newly proposed service is that the latter has a wider coverage in the sense that mere promotion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he services classifiable under BAS and the newly proposed service is that the latter has a wider coverage in the sense that mere promotion of a brand would attract tax under this service even if such promotion cannot be directly linked to promotions of a particular product or service." 96. Evidently the new entry deals with a specific subject which relates to promotion of a brand even though the same may not directly have any link to the promotion of the service itself. Evidently, therefore, the original entry Business Auxiliary Service did not include the activity in the form of promotion of brand unconnected with the promotion of particular service as part of the activity under the said category. The letter therefore rather then lending any support to the defence by the department, it conveys the meaning of the existing entry to be contrary to the arguments advanced on behalf of the department. 97. In Board of Control for Cricket Control in India, the Tribunal while dealing with the entry "sale of spare or time for advertisement and sponsorship services" which was introduced in the said Act w.e.f . 1.5.2005 had observed that we find that a subsequent entry having been enacted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he net of service tax specifically by inclusion thereof by virtue of the amendment brought to the said act w.e.f . 16.6.2005. This has been held to indicate that prior to 16.06.2005, such services were not included in the category of interior decorator service. It was further observed that in series of decisions of the Tribunal which laid down law that if the category of series is brought into service net from a specific data, such services would not be covered under any other category of services. Reliance is placed in the decision in the matter of Chennai Telephones ( BSNL ) vs. Commissioner of C. Ex. Chennai reported in 2006 30 STR 227 wherein it was held that levy of leased circuit service was introduced only from 16.7.2001 and, therefore, it was not proper to demand service tax on the said services for the earlier period. Reference was also made to the case of Jet Airways (India) Ltd. vs. Commissioner of Service Tax, Ahmedabad reported in 2008 (11) STR 645 (Tri. Ahmd .) wherein it was held that once a new entry is introduced with effect from a particular date without disturbing already existing entries, it has to be held that new entry was not covered by the previous entry. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegory of management consultancy service in respect of ERP implementation services it was observed that the department had attempted to classify the ERP services under management consultancy "service" while the Tribunals decision were categorical on the point that such services would fall under the category of consulting engineering services. However, they were excluded from the scope of consulting engineering services by virtue of an exemption Notification No. 4/99-ST dated 28.2.1999. It was observed that once a particular service is excluded from the scope of the service tax where it normally is supposed to fall then it cannot be taxed under some other category. While observing that the assessee had clearly shown that prior to 16.5.2008, the services rendered by the assessee were excluded from the scope of consulting engineers service, the judicial pronouncement disclosed that it was not covered under the management consultancy services and as the information technology services came within the framework of the service tax only from 16.5.2008, therefore, it was held that the services in question for the relevant period could not have been subjected to payment of service tax. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome relevancy if the period involved was subsequent to the new entry regarding brand promotion, but certainly irrelevant for the relevant period as for the said period, taking into consideration the nature of the entry, it was for the department to establish the positive effects of display of logo and it was not for the assessee to prove the negative. The burden to establish the charge was squarely upon the department which it failed to discharge. 105. In Martin Lottery while dealing with the question as to whether sale promotion and marketing of lottery tickets would be exigible to service tax within the meaning of the provisions of Section 65(105) of the Finance Act, 1994, reference was made to the explanation clause inserted in the sub-clause (ii) of Section 65(19) w.e.f . 16.5.2008. The explanation provides that for removal of doubt it is hereby declared that the purposes of this sub-clause service in relation to promotion or marketing of service provided by the client includes in service provided in relation to promotion or marketing of games of chance, organized, conducted or promoted by the client, in whatever name called, whether or not conducted online, including lottery, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants displayed the logo of Sahara on the materials agreed upon and that for such activity by the appellants they were paid money calculated on the basis of number of passengers traveled through the said airlines and the charges were revised upward from time to time by mutual consent. The activity of the appellant having comprised of mere display of logo of Sahara Corporation on various items as agreed, and the entry relating to mere display of logo resulting in promotion and marketing of the business of the client having been introduced subsequent to the relevant period, it could not be said to have been part of Business Auxiliary Service during the relevant period and in any case the activity of Sahara Corporation being in the nature of sale of immovable properties either developed and/ or constructed or built premises therein did not amount to rendering "services" as such, either taxable or otherwise, to others, within the meaning of the expression used in the category of Business Auxiliary Service under the said Act, the said activity by the appellants does not fall within the category of Business Auxiliary Service under the said Act, and hence there was no liability upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt should not be overzealous in searching ambiguity or obscurity in words which are plain. When an expression is capable of more than one meaning, efforts should be to resolve that ambiguity in a manner consistent with the purpose of the provisions and having regard to the consequences of the alternative construction. So long as natural meaning of charging section is adhered to and law is certain, then a strange meaning thereto should not be given. It was further held that a "goods" may be tangible property or an intangible one. It would become goods provided it has the attributes thereof having regard to (a) its utility; (b) capable of being bought and sold; and (c ) capable of being transmitted, transferred, delivered, stored and possessed. If a software whether customized or non- customised satisfies these attributes, the same would be goods. 113. In Star India Private Limited, the Apex Court held that a definition of a term in one statute cannot be used as a guide for construction of a same term in another statutes particularly in a case where statute have been enacted for different purposes. 114. In Slotco Steel , it was held by the Tribunal therein that if the party itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. In Positive Packaging Industries case, it was held that acquiring knowledge by the department does not take away the period of five years provided by the law makers in the Act itself, particularly when the suppression of fact is with intent to evade the payment of duty. 121. In Kerala State Electricity Board case, the Apex Court held that the provisions regarding the liability to pay the interest is enforceable if the person liable to pay the service tax fails to pay the same when it falls due. 122. In Lubri-Chem Industries vs. Collector of Central Excise, Bombay reported in 1994 (73) ELT 257 (SC), it was held that the 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. 123. In State of Tamil Nadu vs. M.K . Kandaswami and Others reported in (1995) 4 Supreme Court Cases 745 it was ruled that while interpreting taxing statute a construction which would defeat its purpose and effect should be avoided and if more than one construction is possible, then the one which preserves its workability and efficacy is to be preferred. 124. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
