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TMI Blog2024 (12) TMI 1141X X X X Extracts X X X X X X X X Extracts X X X X ..... 001 were not changed, except for Income Tax related provisions, since on holistic evaluation of all terms and conditions, it is apparent that it is not an agreement of partnership and thus, there cannot be a service to sell, which appellants are canvassing. Therefore, the agreement dt.17.10.2001 is in the nature of service agreement between M/s GG and the appellant and not a partnership agreement, therefore, there would be liability to discharge Service Tax on the services provided by the appellant to M/s GG. Whether the nature of service being provided by the appellant to M/s GG was classifiable under Business Support Service or is rightly classified as Mining Service under Section 65(105)(zzzh) of the Finance Act, 1994 w.e.f. 01.07.2007? - HELD THAT:- In the facts of the case, it is absolutely clear that the scope of the work is quarrying and the fact that M/s GG holds a prospecting license for black granite granted by the Director of Mines and Geology, the entire activity is mining activity only and not Business Support Service as contended by the appellant. The appellant tried to highlight some of the clauses in their agreement in support that the activities would more appropri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : A. K. JYOTISHI ] M/s SLP Contractors (hereinafter referred to as the Appellant) is a proprietary concern. On certain investigation, the department felt that the appellants have undertaken quarrying of black granite in the mines belonging to M/s Golden Granites (hereinafter referred to as GG ), as part of an agreement between them and received a share of sale proceeds as consideration for their services. After examining the clauses of the agreement between the appellant and M/s GG, it was alleged that the appellant has been rendering services under the category of Mining Services on which they have not discharged Service Tax liability. The department examined various clauses of the agreement and considered that this is not a Joint Venture agreement and it is rather an agreement where the appellants are providing services to M/s GG. 2. On adjudication, the Adjudicating Authority examined the allegation in the light of the agreement between the appellant and M/s GG and held that the so called Joint Venture is not a partnership firm. The reasons for not considering the said agreement as an agreement of partnership, in the given factual matrix, has been summarized at Para 15.1 to 15.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independent persons whose interests are not fused and in the case of partnership firm. Moreover, as seen from the terms of agreement they are sharing only mineral blocks as a consideration of the services, but not the profits. Further, it is observed that the relationship between the two parties appear to be not that of a partnership as one party exercises complete and absolute control over the other and the TDS is also being deducted out of the share of sale proceeds paid by GG to SLP. Further as seen from the clauses the agreement appears to have all the characteristics of a service agreement. (15.6) From the above observations, it can be seen that, M/s SLP is providing service to Golden Granites and is being paid consideration for that service in the form of share of output of the quarry. The Codicil to the agreement dated 17.10.2001 to effect that income tax returns have to be filed separately, does not alter the nature of relationship between the noticee and M/s GG of being a service provider and service receiver. (15.7) Further, the assessee also contends that their arrangement is similar to the one that was mentioned in para 2.3 of Board s circular no. 109/3/2009-ST dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of a letter issued by the Commissioner of Central Excise on 27-2-1997. If the period of limitation of five years is computed from the aforesaid date, the show cause notice having been issued on 15-5-2000, the demand made was clearly within the period of limitation as prescribed, which is five years. 4. Learned Advocate for the appellant has mainly contested that the Adjudicating Authority has not appreciated the terms and conditions of the agreement dt.17.10.2001 read with codicil dt.28.01.2002 for coming to the conclusion that the said agreement is not in the nature of partnership agreement and that relation between the appellant and M/s GG is in the nature of service provider and service recipient for which the consideration is being received in the form of a share in the sale proceeds. He further contends that the reliance placed by them on the Board s Circular No.109/3/2009-ST dt.23.02.2009 has been ignored by the Adjudicating Authority at Para 15.7 of the OIO, whereas, the same clarification is appropriately applicable in their case also. As per the Advocate, the above Circular had considered various agreements between the theatre owners and distributors to clarify that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for confirming the demand and highlights certain clauses in the said agreement dt.17.10.2001. He further relies on the provisions under the Partnership Act, 1932 in support that the claim of the appellant that the agreement is that of partnership is not correct as it is not fulfilling certain conditions under the Partnership Act. 8. Heard both the sides and perused the records. 9. In the factual matrix, the following issues are required to be addressed in order to understand whether the Adjudicating Authority has rightly confirmed the demand or otherwise. A. Whether the agreement dt.17.10.2001 along with the codicil can be considered as agreement of partnership or otherwise. B. Whether the nature of service being provided by the appellant to M/s GG was classifiable under Business Support Service or is rightly classified as Mining Service under Section 65(105)(zzzh) of the Finance Act, 1994 w.e.f. 01.07.2007. C. Whether, in the facts of the case, the provisions for invoking extended period if justified or otherwise. (A) Whether the agreement dt.17.10.2001 along with the codicil can be considered as agreement of partnership or otherwise : - 10. On this issue, the agreement dt.17.10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient in the previous year. 11. As far as the issuance of invoices is concerned, this is required to be raised by the appellant or M/s GG in favour of M/s GG, even though the sales proceeds on realization are required to be credited to the account of M/s GG first. M/s GG also reserves their right to control, supervise and superintend over the working in the prospecting license area and quarry lease area and all the records and accounts were to be maintained by the raising contractor but will be in the custody of M/s GG. It is also noticed that as per clause 3, there is a penal clause imposed on the raising contractor in case they fail to implement terms and conditions of the agreement or infringes any condition or defaults in properly working the prospecting license area or quarry lease area. Therefore, a general perusal of the terms and conditions of the agreement would indicate that it is not an agreement between the two partners rather it is exactly what it has been referred to as in the agreement i.e., raising contract cum sale agreement . It is a fact that both the parties to this contract have certain expertise and certain resources at their disposal but the utilization thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dt.28.01.2002. He has further submitted that there was no need for entering into raising contract cum sale agreement between the appellant and M/s GG, if both of them were partners in the same firm as an agreement is always between two independent persons whose interests are not fused as in the case of partnership firm. It was also pointed out that, from the terms and conditions of agreement, it is apparent that they are only sharing mineral blocks as a consideration for the services but not the profits. Whereas, as per Section 13(b) of the Partnership Act, 1932, the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm. It was also pointed out that the relation between the two parties appears to be not of partnership as one party exercises complete and absolute control over the other and the TDS under Income Tax Act, 1961, is also being deducted out of the share of sale proceeds paid by M/s GG to the appellant. 14. Therefore, we find much force in the contention of the department that this is an agreement between service provider and service recipient and not a partnership agreement, if all the clauses are ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities into Business Support services. These services are incidental to their mining services and are intrinsically required to be performed in connection with their mining activities in terms and conditions for providing that mining service to M/s GG. We find much force in the contention of the learned AR s argument that the nature of the activities would be more aptly covered within the category of Mining service and not under Business Support service in the given factual matrix. (C) Whether, in the facts of the case, the provisions for invoking extended period if justified or otherwise:- 16. The Appellants have relied on various case laws in support that since they had brought to the knowledge of department their details about agreement and particulars of month-wise share of sales between the appellant and M/s GG, there was no suppression on their part and extended period would not be applicable. They have relied on the judgment in the case of Dolphine Detective Agency Vs CCE, Belgaum [2006 (4) STR 25 (Tri- Bang)] in support that when all the relevant facts were in the knowledge of the authority, suppression cannot be alleged. 17. We have perused the correspondences dt.29.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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