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TMI Blog2018 (5) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... on 65 (104c) indicates that while it is indeed an inclusive definition, the type of services sought to be taxed are those of the genre and outsources services normally prevalent in business and commerce like evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules etc. In our view, the intention of the legislature to bring within the ambit of ‘Business Support Services’ only outsourced activities relating to management, logistics and customer relations etc. is vindicated by the Explanation to the said definition which exemplifies ‚infrastructural support services‛ as providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet etc. There, then is no doubt, in our mind, that all these examples indicated in the definition are those relating to outsourcing of business, commerce, strategy planning, logistics planning and management, customer services, marketing assistance etc. We are unable to fathom how permission to run a bar adjacent to TASMAC wine shop along with a responsibility cast on the successf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. TASMAC is vested with the special privilege of wholesale supply of Indian Made Foreign Liquor (IMFL) for the whole State of Tamil Nadu as per Section 17 (C) (1-A) (a) of the Tamil Nadu Prohibition Act, 1937 (Tamil Nadu Act X of 1937). Under Section 17-C(1-B)(a) of the said Act, TASMAC is vested with exclusive privilege of selling, by retail, IMFL for the whole State of Tamil Nadu. The Corporation has various shops across the state for the purpose of sale of liquor and many of them have bars attached to them. With effect from 1-2-2005, TASMAC granted permission to contractors to sell eatables in the bar and to collect the empty liquor bottles left in the bars for a monthly license fee payable by such contractors to it. TASMAC floats tenders setting an upset price (base price) which is fixed as 2.5% of the average monthly turnover of the shop raised by the current year growth rate @ 10% and the highest bidder is granted permission for sale of eatables and to collect the empty liquor bottles on payment of security deposit which is equal to the consideration payable for 2 months. The licence fee collected on monthly basis is accounted under Income from Operations in their Profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iquor to pubic; while doing so it has responsibility to make sure liquor is consumed safely in bar s adjacent to it. Merely because these bars are run by third- parties selected by TASMAC through tender as opposed to being run by TASMAC itself cannot change the fundamental nature of TASMAC s activities to one of a support services provider. v) The very facts that these statutory rules have to be followed by bar contractors and enforced by TASMAC through the Tamil Nadu Prohibition Act via filing FIR to the TN Police Department shows that these bars are merely a practical devolvement of power and rights of TASMAC and not a business support service‛ by the appellant. vi) TASMAC is nothing but an instrumentality of the State as recognized by the Hon ble jurisdictional High Court in Hotel Bar Association of Tamil Nadu Vs Secretary to Government, Commercial Taxes Dept., TN (W.P.No.22072 of 2012 dated 31.3.2015) (para-24) and is carrying out activities only on behalf of the State. vii) TASMAC exercises its sovereign rights provided by the State Government of Tamil Nadu to retail liquor and be responsible for its consumption; liquor is a state subject and sovereign rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeal. (ii) Ld. A.R took us through the definition of Business Support Service introduced w.e.f. 1.5.2006. (iii) She submitted that the services provided by TASMAC are clearly such that are provided only in relation to business or commerce. (iv) The definition is an inclusive definition. Only few examples of similar activities which can be included under that service category have been included in the definition. (v) TASMAC have permitted the contractors to sell eatables and collect empty liquor bottles in the bars by way of tender. The fees so collected are in the nature of income for TASMAC and definitely cannot be considered as a statutory fee. (vi) In fact, the said charges are accounted by TASMAC in their audited balance sheets as income from operations‛. (vii) TASMAC cannot be considered as Government. It is only a limited corporation set up by the Tamil Nadu Government. TASMAC may have conducted auctions and entrusted the work of running the bars etc. to contractors based on Minutes of Board Meeting of their Board of Directors who are senior Government officers. However, such decisions by their Board of Directors cannot be said to be giving a so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable service was defined in Section 65 (105) (zzzq) of the Finance Act, 1994 which reads as under : Taxable Service means any service provided or to be provided to any person, by any other person, in relation to support services of business or commerce, in any manner An analysis of the definition in Section 65 (104c) indicates that while it is indeed an inclusive definition, the type of services sought to be taxed are those of the genre and outsources services normally prevalent in business and commerce like evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules etc. In our view, the intention of the legislature to bring within the ambit of Business Support Services only outsourced activities relating to management, logistics and customer relations etc. is vindicated by the Explanation to the said definition which exemplifies infrastructural support services‛ as providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet etc. There, then is no doubt, in our mind, that all these exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under : A word in a statutory provision is to be read in collocation with its companion words - The pristine principle based on the maxim noscitur a sociis is relevant in understanding the import of such words. 6.6 Viewed in this light, we are unable to fathom how permission to run a bar adjacent to TASMAC wine shop along with a responsibility cast on the successful contractor to sell eatables and collect empty bottles, albeit for a fee, can be said to be analogous and in immediate connection with the type of activities exemplified in the inclusive definition of Support Services of Business or Commerce‛. 6.7 We are therefore not able to find favour with the proposition that the income generated by the appellant by way of collecting fees from tenders for contracting the impugned activities to successful contractors can, by any stretch of imagination are to be considered as taxable income and become liable to service tax under BSS. We have thus no hesitation in setting aside that part of the impugned order which has confirmed the tax liability on the appellant for the period upto 30.06.2012 under Business Support Service defined under Section 65 (104c) read with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... negative list of services under Section 66D ibid or those which were specifically exempted otherwise, would be exigible to service tax levy. 6.10 Ld. Advocate has been at pains to argue that the impugned activities of TASMAC is only that performed as a sovereign function and should be considered as a service‛ by government which are excluded from the purview of service tax. We are not able to agree with this contention. 6.11 On the other hand, we find merit in the argument made by Ld. AR that the decision by the Board of Directors of TASMAC giving permission to award such contractors for running a bar, supplying eatables, cleaning, collecting empty bottles etc. is only a decision of the Board and cannot be brought on par with sovereign function exercised by the State. In fact, even from the copies of the audited balance sheets of TASMAC submitted along with the appeal, we find that the balance sheet has been prepared and audited only in terms of Section 227 (4A) of the Companies Act, 1956 and in terms with the accounting standards referred to in Section 211 (3C) of the Companies Act, 1956. Even the Supplementary Audit conducted by the Comptroller and Auditor General of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion or an authority constituted under an Act passed by Parliament or State Legislature is Government‛ or Local authority‛ was addressed in para 2.4.7 which reads as follows : 2.4.10 Would various entities like a statutory body, corporation or an authority constituted under an Act passed by the Parliament or any of the State Legislature be Government or local authority ? A statutory body, corporation or any authority created by the Parliament of a State Legislature is neither Government nor a local authority as would be evident from the meaning of these terms explained in point nos.2.4.7 and 2.4.8 above respectively. Such statutory body, corporation or an authority are normally created by the Parliament or a Stage Legislature in exercise of the powers conferred under article 53 (3) (b) and article 154 (2) (b) of the Constitution respectively. It is a settled position of law Government (Agarwal v. Hindustan Steel AIR 1970 Supreme Court 1150) that the manpower of such statutory authorities or bodies do not become officers subordinate to the President under article 53 (10 of the Constitution and similarly to the Governor under article 154 (1). Such a st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AC is liable to pay service tax only on the 1% commission retained by them for the period April 2013 to March 2014 and April 2014 to March 2015. The ld. Counsel prays that the same benefit may be extended to the intervening period of 1.7.2012 to 28.3.2013. We are afraid that this contention is not acceptable as it is not based on any legal footing, but only principles of equity. There is no equity in fiscal law. Therefore, we hold that TASMAC is liable to pay service tax of the licence fees received for the period 1.7.2012 to 28.3.2013. So ordered. 6.19 Coming to the matter of penalty, we find that the entire dispute is one of interpretation and even from the record, we find that there are at least two circulars before introduction of negative list regime and one subsequent to that, which have found it necessary to dwell upon the liability to service tax in respect of such activities performed by instrumentalities of the State. We also find that the issue of liability to tax in respect of such activities was also subject matter of litigation as evidenced from number of High Court judgements that have been cited supra. In this scenario, there cannot be any penalty imposed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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