2018 (5) TMI 404 – CESTAT CHENNAI – 2018 (19) G. S. T. L. J25 (Tri. – Chennai) – Business support services – collection of monthly licence fee – 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 – It appeared to the department that the contractors can conduct their business only after issue of a licence by TASMAC, on payment of licence fee; that without the support of TASMAC in the form of giving permission to sell eatables and to collect empty bottles, contractors would have no business; therefore upto 30-06-2012, the services rendered by TASMAC is a taxable service under ‚Support Service of Business or Commerce‛ under Section 65 (104c) read with Section 65 (105) (zzzq) of the Finance Act, 1994; that after 1.7.2012, the services are continued to be taxable since they are not covered under the negative list or otherwis
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to outsourcing of business, commerce, strategy planning, logistics planning and management, customer services, marketing assistance etc.
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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‛ – For the period October 2008 to 30.06.2012, the demand of service tax on the appellant under ‚Support of Business and Commerce Services‛ is not sustainable and is set aide
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W.e.f. 1-7-2012, all services except those excluded by Section 65B (44), in particular, transfer of title in goods, deemed sale, transaction in money etc. will be liable to service tax or those falling in the negative list of services under Section 66D ibid or those which were specifically
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Hon ble Shri Madhu Mohan Damodhar, Member (Technical) Shri V. Vikram, Advocate For the Appellant Ms. P. Hemavathi, Commissioner (AR) For the Respondent ORDER Per Bench The MAs filed by Revenue for change cause title are allowed. As we take up the appeals themselves for hearing and disposal, the other MAs filed by Revenue for grant of early hearing get disposed of. 2. The facts of the case are that that the appellant, Tamil Nadu State Marketing Corporation Ltd. (hereinafter referred to as TASMAC) is a company incorporated under the Companies Act, 1956 on 23.05.1983 with Registered Office at Chennai and it is a 100% Government of Tamilnadu undertaking. 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 retai
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nt of licence fee; that without the support of TASMAC in the form of giving permission to sell eatables and to collect empty bottles, contractors would have no business; therefore upto 30-06-2012, the services rendered by TASMAC is a taxable service under Support Service of Business or Commerce‛ under Section 65 (104c) read with Section 65 (105) (zzzq) of the Finance Act, 1994; that after 1.7.2012, the services are continued to be taxable since they are not covered under the negative list or otherwise exempted. Accordingly, Show Cause Notices No.58/2014 to 90/2014 dt. 21.04.2014 were issued to the appellants proposing demand of service tax and considering the same as cum service tax value, under proviso to Section 73 (1) of the Act, along with interest under Section 75 ibid and also imposition of penalties under Section 76, 77 & 78 ibid. After due process of adjudication, the Commissioner of Service Tax, Chennai-I, vide Original-in-Original No.CHN-SVTAX-001-COM-01 to 33-2015-
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(sit and drink) the same at the adjacent place which is called a Bar‛; the rules governing the Bar are also governed by Statute which prescribes the location, timings, holidays of the Bar too. iv) TASMAC is solely responsible for retailing liquor 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
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sing its sovereign rights. The definition of Business Support Service will clearly fall outside the ambit of appellant s activities and since services which are provided by a Government in terms of their sovereign right to business activities, and which are not substitutable in any manner by any private entity, are not support services. Examples of exercise of such sovereign functions would be grant of mining or licensing rights or audit of Government entities by CAG etc. Reference is made to Board s Circular No.89/07/2006 dt. 18.12.2006 and Circular No.159/10/2012-ST dt. 19.06.2012. ix) Ld. Advocate pointed out that as per GO (Ms.) No.20 dt. 29.03.2013, an amendment was brought in to the Tamil Nadu Liquor Retail Vending (in Shops and Bars) Rules, 2003 empowering the TASMAC to grant privilege of running bars to private parties by tender, to decide upset price and other terms and conditions of tender; to collect tender amount from successful tenderers and remit the same to Government. H
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ly 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
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r 2008 to March 2013. The impugned order has held that the activities of TASMAC would fall within the ambit of Support Service of Business or Commerce‛ defined under Section 65B (44) for the remaining period. 6.2 The core issue that therefore comes up for decision is whether this assertion of the adjudicating authority is correct or otherwise. 6.3 For the period upto 30.06.2012, the definition of Support Service of Business or Commerce‛ under Section 65 (104c) of the Finance Act, 1994 reads as under : Support Services of Business or Commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policie
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nd 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. 6.4 Hence even in such an inclusive definition, the activities which have not been included, but which could be conceived as falling within the said taxable category will necessarily have to be like services‛ relating to similar outsourced services of busin
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y reference to the meaning of words associated with it; such doctrine is broader than the maxim ejusdem generis. In fact the latter maxim is only an illustration or specific application of the broader maxim noscitur a sociis . It must be borne in mind that noscitur a sociis, is merely a rule of construction and it cannot prevail in cases where it is clear that the wider words have been deliberately used in order to make the scope of the defined word correspondingly wider. It is only where the intention of the Legislature in associating wider words with words of narrower significance is doubtful, or otherwise not clear that the present rule of construction can be usefully applied. The relevance of Noscitur a Sociis has been reiterated by Hon ble Supreme Court in a number of judgments. For example, in the case of K.Bhagirathi G. Shenoy v. K.P. Ballakuraya, (1999) 4 SCC 135 ; AIR 1999 SC 2143 it is held as under : A word in a statutory provision is to be read in collocation with its compa
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r the period upto 30.06.2012 under Business Support Service defined under Section 65 (104c) read with Section 65 (105) (zzzq) of the Finance Act, 1994. 6.8 However, the position changes after the introduction of the Negative List regime w.e.f. 1.7.2012, from which date the activities which were liable to service tax under Finance Act, 1994 were given a much wider and broad banded scope in Section 65B (44) as under : (44) service means any activity carried out by a person for another for consideration and includes a declared service, but shall not include- (a) an activity which constitutes merely,- (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or (iii)a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relati
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use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. …. … …. 6.9 Then, w.e.f. 1-7-2012, all services except those excluded by Section 65B (44), in particular, transfer of title in goods, deemed sale, transaction in money etc. will be liable to service tax or those falling in the 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 a
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/2007-ST dt. 23.08.2007, which is further reiterated by Circular No.89/7/2006 dt. 18.12.2006 where it is inter alia clarified as follows : However, if a sovereign / public authority provides a service, which is not in the nature of statutory activity and the same is undertaken for a consideration (not a statutory fee), then in such cases, service tax would be leviable as long as the activity undertaken falls within the scope of a taxable service as defined. 6.13 We find that the adjudicating authority has taken note of the decision of the Tribunal which has referred to the above Board s Circular in the case of Karnataka State Warehousing Corporation Vs CST Bangalore – 2010 (19) STR 32 (Tri-Bang.). In appeal filed by the department, the Hon ble High Court of Karnataka in its judgement reported in 2011 (23) STR 126 (Kar.) with regard to taxability of the services provided by the Karnataka State Warehousing Corporation, while confirming that there would be no demand of tax beyond the norm
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oration 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 st
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upset price and other terms and conditions of tender, from time to time, with the prior approval of the Commissioner of Prohibition and Excise. The Corporation, as agency shall collect the tender amount from the successful tenders and remit the same to the Government on or before teh 25th of the following month and the Corporation may retain 1% of the amount so collected as agency commission . This amendment, in our view, has accorded statutory backing and authority to TASMAC under law to grant the privilege of running bars, selling eatables and collecting empty bottles to private entities by tender. The entire tender amount from such successful tenderers, except for 1% of the collected amount retained as agency commission by TASMAC is remitted to the Government of Tamil Nadu. 6.17 In the circumstances, from 29.03.2013, the impugned services of TASMAC would definitely fall in the negative list of services as statutory function being carried out by them based on authority of law. 6.18
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MAC 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 appellant. So ordered. 6.19 To sum up, (1) For the period October 2008 to 30.06.2012, the demand of service tax on the appellant under Support of Business and Commerce Services‛ is not sustainable and is set aide with consequential benefit,
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