2021 (4) TMI 1157 - CESTAT AHMEDABAD

Levy of Service Tax - appellant is a partner and the service recipient is a partnership firm - service recipient having relationship of partner and partnership firm can be categorised as service provider and service recipient or not - refundable or not even when the assessment of payment of service tax was not challenged - HELD THAT:- In a partnership firm, partner‘s capital can be in the form of cash/asset. It can also be in the form of contribution of skill and labour alone without contribution in cash. This issue has been considered by Hon‘ble Supreme Court in the case of CHANDRAKANT MANILAL SHAH AND ANOTHER VERSUS COMMISSIONER OF INCOME-TAX [1991 (10) TMI 1 - SUPREME COURT]. In the said case, the issue for deciding was the validity of the partnership between the Karta of a Hindu undivided family and one of his sons. The son had not brought any cash/asset as his capital contribution to the partnership but was contributing only his skill and labour. Hon‘ble Supreme Court observed that Indeed, skill and labour are by themselves possessions. "Any possession" is one of the dictionary meanings of the word 'property'. In its wider connotation, therefore, the mental and physical capacity generated by skill and labour of an individual and indeed the skill and labour by themselves would be the property of the individual possessing them. They are certainly assets of that individual and there seems to be no reason why they cannot be contributed as a consideration for earning profit in the business of a partnership firm.

From the observation of the Hon‘ble Supreme Court it follows that remuneration received by a partner by employing his skill and labour as per partnership deed is also a profit. The profit in such circumstances can be a special share in the profit. In the present case also, the appellant is a partner performing some duties for which he has an expertise, skill in the marketing and distribution of the goods manufactured by partnership firm M/s Zydus Healthcare. And as a remuneration, the appellant have been received the amount which is nothing else but a special share in the profit.

As per the plain reading of section 85(1) of Finance Act, it provides for filing an appeal before the Commissioner (Appeals) only in case an order is passed by an officer below the rank of Principal Commissioner or Commissioner of Central Excise. In the case of self assessment of Service Tax, there is no order of assessment passed by any officer below the rank of Principal Commissioner or Commissioner of Central Excise. Therefore, there is no provision corresponding to section 47(2) of Customs Act, 1962 in the Finance Act, 1994. Therefore, there is a clear distinction between the assessment under Customs and Service tax.

Recovery of tax - HELD THAT:- The appellant have clearly declared that they have not recovered the amount of Service Tax from Zydus Health Care and the burden of Service Tax was not passed on to the Zydus Health Care. It shows that both the authorities have ignored this declaration made by the appellant. Therefore, the contention made by them that the appellant has not satisfied that the incidence of Service Tax, for which refund claim was made, has not been passed on is apparently erroneous.

The appellant are entitled for the refund of the claim made by them - Appeal allowed - decided in favor of appellant.