Tamil Nadu State Marketing Corporation Ltd. Versus The Principal Commissioner of GST & Central Excise Chennai North Commissionerate
Service Tax
2018 (5) TMI 404 – CESTAT CHENNAI – 2018 (19) G. S. T. L. J25 (Tri. – Chennai)
CESTAT CHENNAI – AT
Dated:- 3-4-2018
Application Nos. ST/Misc/CT/40128-40160/2018, ST/EH/40161-40193/2018 and Appeal Nos. ST/41645-41677/2015 – Final Order No. 41015-41047 / 2018
Service Tax
Hon'ble Ms. Sulekha Beevi C.S. Member (Judicial) And 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
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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 & Loss Account. 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 ot
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um
3. On 08-03-2018, when the matter came up for hearing, the appellants were represented by Shri V.Vikram, Advocate made oral and written submissions which can be broadly summarized as under :
i) TASMAC is not rendering any service directly or indirectly to consumers. TASMAC is a seller of a liquor and not service provider.
ii) TASMAC is an institution created by Statute and acting on behalf of the State Government of Tamil Nadu
iii) The buyers of the Liquor from TASMAC shop and consume (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 cann
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ed with rights such as mining rights i.e. those rights which are all handed exclusively by the State.
viii) The decision to float tender to selected third parties / contractors to run bars adjacent to TASMAC shops was pursuant to decision taken by the TASMAC Board of Directors comprising of senior government officers. In the conduct of the tender process and the grant of permission to run the bars and assigning of the work of collection of empty bottles, TASMAC was only acting as agent of the State exercising 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
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ed out any fraud or exercised any wilful misconduct. So also, the contention of department that appellant has not obtained registration is incorrect since they had registered under GTA service and had been filing ST-3 returns.
4. (i) On the other hand, the department represented by Ld. Commissioner (A.R) Ms. P. Hemavathi vehemently opposed the 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 s
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services outsourced by business entities for use in business or commerce are very much taxable as 'Business Support Service' and that the definition only gives indicative list of such outsourced services. The activity of TASMAC in permitting the contractor to sell eatables in the bar and to collect empty bottles and sell them provides support to the business of such contractors. Hence they cannot escape tax liability under the said category.
5. Heard both sides and have gone through the facts.
6.1 The period of dispute encompasses October 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 Commerc
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ct, 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 competen
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s that 'when two or more words which are susceptible of analogous meaning are coupled together, they are understood to be used in their cognate sense. They take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general.'
In 'Principles of Statutory Interpretation' by Justice G.P. Singh, the said maxim is further explained as follows :
“Associated words take their meaning from one another under the doctrine of noscitur a sociis, the philosophy of which is that the meaning of the doubtful word may be ascertained by 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 deliberatel
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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 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 sco
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ipalities and Members of other local authorities who receive any consideration in performing the functions of that office as such member; or
(B) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity;' or
(C) the duties performed by any person as a Chairperson or a Member of a Director in a body established by the Central Government of State Governments or local authority and who is not deemed as an employee before the commencement of this section.
Explanation 2 – for the purposes of this clause, transaction in money shall not include any activity relating to the 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, transacti
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een 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 India of TASMAC has been carried out in terms of Section 619 (3) (b) of the Companies Act, 1956 only. The activities of TASMAC for most of the period under dispute cannot therefore be said to be activities assigned and performed by sovereign / public authority under the authority of law.
6.12 We find that this aspect has been also clarified by the CBEC in Master Circular No.96/7/2007-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, serv
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urt in the case of Karnataka Government Insurance Department Vs Asst.CCE Bangalore – 2012 (26) STR 521 (Kar.), which ratio was echoed by the Hon'ble Kerala High Court as reported in 2012 (28) STR 337 (Kar.) and also by the High Court of Allahabad in the case of Greater Noida Industrial Developmental Authority Vs CCE & CE reported in 2015-TIOL- 1008-HC-ALL-ST.
6.15. Along with the introduction of Negative List of services, CBEC thought it proper to issue an Education Guide, giving the official Guidelines for new system of Levy of Service Tax on the basis of negative List w.e.f. 1.7.2012, wherein the issue whether entities like statutory body, corporation 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
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also do not all in the definition of 'local authority.
Thus regulatory bodies and other autonomous entitled which attain their entity under an act would not comprise either government or local authority.”
6.16 At the same time, we take note that in exercise of the powers conferred by sections 17-C, 17-D, 21 and 22-D read with Section 54 of Tamil Nadu Prohibition Act, 1937, in Tamil Nadu Liquor Retail Vending (in Shops and Bars) Rules, 2003 was amended by insertion of Rule 9A w.e.f. 29.03.2013 as follows :
“9A. Grant of privilege to run the bar:- The privilege of running bars may be granted to private parties by tender. The Board of the Corporation may decide the 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 the 25th of the following month and the Co
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t has agreed that appellant is liable to pay service tax only on the 1% of the payments made by contractors. He has placed copy of OIA No.262/2017 dt. 30.11.2017 before us. The Commissioner (Appeals) vide the said order has held that TASMAC 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 re
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