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TMI Blog2020 (9) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... the period thereafter till 31st March 2013 leading to cross-appeals before us by both sides, is a business model that appears to have appealed to economics of outsourcing that, according to tax authorities, has been contrived to burrow a route with intent to evade. An overview of the contract options and obligations as well as the statutory provisions sought to be superimposed on these may be worth tarrying upon. 2. M/s Arval India Pvt Ltd provides motor vehicles, identified by their corporate customers, on lease for specified periods and which may, on exercise of option by the lessee, incorporate maintenance and repair (denominated as 'fleet management') during the tenor of the agreement. The consideration, to be paid at regular intervals specified in the lease agreement, is sought to be brought within the authority to levy service tax under Finance Act, 1994. The impugned order has upheld the taxability while discarding the proposal to invoke the extended period beyond eighteen months computed backwards from the relevant date, which is under challenge by the assessee-appellant. There is no dispute that the tax liability on 'fleet management' has been discharged as provider of ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely garnering of revenues from a new source but also to ensure that tourist taxi operations were not targets of a discriminatory levy. The two services that were thereby brought within the net fulfilled similar customer demands in the market space. Though the appellation was not varied, subsequent amendments extended the scope of tax to cover all users of every kind of automobile for carriage of persons without the right of ownership. In other words, the substitution of ownership by usage, that was restricted only by certain minimal limitations to distinguish from the former, was no longer an activity beyond the pale of tax. 5. In the impugned order, the adjudicating authority has held that, though lease was 'deemed sale' and subject to levy under 'sales tax' or 'value-added tax', the same transaction could be subject to central tax and that the 'gross amount' received would be the taxable value leading to the demands within the normal period of limitation. It is but natural that, in the system of mutually exclusive distribution of taxing powers, an assessee, burdened with having to contribute to tax revenues through the deeming fiction of 'sale' and attempted to be brought withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 'lease rentals' not having been offered for tax along with the issue of leviability of tax on 'fleet management charges' on which the assessee before us has discharged tax liability. We take note that, in this decision, the Tribunal attached premium to the detailed consideration of the attributes of sale, as expounded in Bharat Sanchar Nigam Ltd v. Union of India [2006 (2) STR 161 (SC)], in the order of the original authority thus '13....... We note that the principle laid down by the Hon'ble Supreme Court in BSNL (supra) will guide while determining the actual nature of transaction between the parties. We are satisfied that the impugned order examined the issue to arrive at the conclusion that the appellant are liable to service tax in respect of the services rendered by them under the category of "rent-a-services".' and, as it appears to be an approval of the logical weaponry deployed in the order impugned on the facts that were mapped out, we are unable to concede that the facts in the dispute before us are identical in terms of the control retained by the assessee herein over the leased vehicles. In a dispute over competing claims of fitment in either of the two lists in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usly existing taxable entries, irrespective of inclusion within the taxable service in section 65(105)(zzzza) of Finance Act 1994 were intended only for services simpliciter. 9. Such an exposition was warranted as several decisions, pronounced till then, limited the tax on 'sale' to value of materials transferred; the alternative, 'service' component, was held to be outside the scope of that levy. It was, therefore, held that 'composite contracts', conforming to the Explanation in section 65(105)(zzzza) of Finance Act, 1994 alone could be taxed, to the extent of 'service' component, under the legislative powers of the Union. The decisions cited by Learned Authorized Representative are found to fall in such category. 10. The primary issue agitated before the Hon'ble Supreme Court in re Association of Leasing & Financial Service Companies was the legislative competence of Parliament to enact provisions for taxing certain activities under section 65(105)(zm) of Finance Act, 1994 in the face of exclusion legislated by Article 366 (29 A) of the Constitution of India and, having drawn the essential difference between the two activities by several parameters, such incorporation was uphe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early and unmistakably holds that unless the splitting of an indivisible works contract is done taking into account the eight heads of deduction, the charge to tax that would be made would otherwise contain, apart from other things, the entire cost of establishment, other expenses, and profit earned by the contractor and would transgress into forbidden territory namely into such portion of such cost, expenses and profit as would be attributable in the works contract to the transfer of property in goods in such contract. This being the case, we feel that the learned counsel for the assessees are on firm ground when they state that the service tax charging section itself must lay down with specificity that the levy of service tax can only be on works contracts, and the measure of tax can only be on that portion of works contracts which contain a service element which is to be derived from the gross amount charged for the works contract less the value of property in goods transferred in the execution of the works contract. This not having been done by the Finance Act, 1994, it is clear that any charge to tax under the five heads in Section 65(105) noticed above would only be of serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he works contract only can be included in the value of the goods." For the same reason the Centre cannot include the value of the SIM cards, if they are found ultimately to be goods, in the cost of the service. As was held by us in Gujarat Ambuja Cements Ltd. v. Union of India [(2005) 4 SCC 214], SCC at p. 228, para 23: - "This mutual exclusivity which has been reflected in Article 246(1) means that taxing entries must be construed so as to maintain exclusivity. Although generally speaking, a liberal interpretation must be given to taxing entries, this would not bring within its purview a tax on subject-matter which a fair reading of the entry does not cover. If in substance, the statute is not referable to a field given to the State, the court will not by any principle of interpretation allow a statute not covered by it to intrude upon this field." (at paras 88 and 89) 17. We find that the assessees are correct in their submission that a works contract is a separate species of contract distinct from contracts for services simpliciter recognized by the world of commerce and law as such, and has to be taxed separately as such. In Gannon Dunkerley, 1959 SCR 379, this Court reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olve the requisite machinery and procedure thereby making the whole thing, from beginning to end, purely administrative in character completely ignoring the legal position that the assessment of a tax on person or property is a quasi judicial exercise." Speaking for the majority Sinha, C.J. said: (K.T. Moopil case [AIR 1961 SC 552], AIR p. 559, para 9) "9. ... Ordinarily, a taxing statute lays down a regular machinery for making assessment of the tax proposed to be imposed by the statute. It lays down detailed procedure as to notice to the proposed assessee to make a return in respect of property proposed to be taxed, prescribes the authority and the procedure for hearing any objections to the liability for taxation or as to the extent of the tax proposed to be levied, and finally, as to the right to challenge the regularity of assessment made, by recourse to proceedings in a higher civil court. The Act merely declares the competence of the Government to make a provisional assessment, and by virtue of Section 3 of the Madras Revenue Recovery Act, 1864, the landholders may be liable to pay the tax. The Act being silent as to the machinery and procedure to be followed in making t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emphasis supplied) In State of A.P. v. Nalla Raja Reddy [AIR 1967 SC 1458] this Court was examining the constitutional validity of the Andhra Pradesh Land Revenue (Additional Assessment) and Cess Revision Act, 1962 (22 of 1962) as amended by the Amendment Act (23 of 1962). Noticing the absence of machinery provisions in the impugned enactments this Court observed: (AIR p. 1468, para 22) "22. ... if Section 6 is put aside, there is absolutely no provision in the Act prescribing the mode of assessment. Sections 3 and 4 are charging sections and they say in effect that a person will have to pay an additional assessment per acre in respect of both dry and wet lands. They do not lay down how the assessment should be levied. No notice has been prescribed, no opportunity is given to the person to question the assessment on his land. There is no procedure for him to agitate the correctness of the classification made by placing his land in a particular class with reference to ayacut, acreage or even taram. The Act does not even nominate the appropriate officer to make the assessment to deal with questions arising in respect of assessments and does not prescribe the procedure for assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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