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2023 (7) TMI 1386 - AT - Service TaxLevy of service tax - Business Auxiliary service or not - commission on sale of liquor - SCN alleged that the Corporation was not a purchaser of liquor and it was merely providing sales, marketing activities covered under BAS - HELD THAT - Where service tax is chargeable on any taxable service with reference to its value, then such value shall be determined in the manner provided for in (i), (ii) or (iii) of subsection (1) of section 67. What needs to be noted is that each of these refer to where the provision of service is for a consideration , whether it be in the form of money, or not wholly or partly consisting of money, or where it is not ascertainable. In either of the cases, there has to be a consideration for the provision of such service. Explanation to sub-section (1) of section 67 defines consideration to include any amount that is payable for the taxable services provided or to be provided, or any reimbursable expenditure, or any amount retained by the lottery distributor or selling agent. The contention of the Corporation is that the amount collected by the Corporation for the reason that the conditions stipulated in the agreement had not been complied with by the liquor manufacturers are not consideration in view of any service and, therefore, cannot be held to be taxable under section 66E(e) of the Finance Act 1994 in view of the Larger Bench decision of the Tribunal in Commissioner of Service Tax, Chennai vs. Repco Home Finance Ltd. 2020 (7) TMI 472 - CESTAT CHENNAI and the Division Bench decision of the Tribunal in South Eastern Coalfileds vs. Commissioner of Central Excise and Service Tax 2020 (12) TMI 912 - CESTAT NEW DELHI . In Repco Home Finance, the Larger Bench of the Tribunal held that the consideration must flow from the service recipient to the service provider for a taxable service provided under the Finance Act. The service recipient may have to fulfil certain conditions of the contract but that would not necessarily mean that it would form part of the value of the taxable service. Thus, the transaction of purchase and sale of liquor by the Corporation will not fall within the ambit of BAS and would, therefore, not be taxable - Appeal allowed - decided in favour of appellant.
Issues Involved:
1. Whether the Corporation was liable to pay service tax under 'Business Auxiliary Services' (BAS) for the sale of liquor. 2. Whether the amounts collected as 'other incomes' or 'miscellaneous income' by the Corporation are subject to service tax. 3. Whether the extended period of limitation under section 73(1) of the Finance Act was applicable. 4. Whether the decision of the Rajasthan High Court and other precedents applied to the present case. Summary: Issue 1: Liability under BAS for Sale of Liquor The Principal Commissioner issued two show cause notices alleging that the Corporation earned commission on liquor sales and failed to pay service tax under BAS. The demand for service tax was partially confirmed. However, the Rajasthan High Court had previously ruled that the Corporation was involved in the sale of goods, not services. The Tribunal upheld this view, noting that the Corporation was not a service provider but engaged in trading activities. Consequently, the demand for service tax on the commission was dropped. Issue 2: Taxability of 'Other Incomes' or 'Miscellaneous Income' The Principal Commissioner confirmed the demand for service tax on amounts categorized as 'other incomes' or 'miscellaneous income', including charges such as Late Inward Charges, Order for Supply Extension/Cancellation Fee, Transfer Out Order Fees, RSBCL Margin, Inactive stocks/demurrage charges, Liquidity Damages, and Miscellaneous Receipts. The Corporation contended these were not 'consideration' for any service. The Tribunal referenced the Larger Bench decision in Repco Home Finance Ltd. and the Division Bench decision in South Eastern Coalfields, concluding that such amounts were not consideration for any taxable service. The Circular dated 28.02.2023 by the Central Board of Indirect Tax & Customs also supported this view, clarifying that such amounts are not subject to service tax. Issue 3: Extended Period of Limitation The show cause notices invoked the extended period of limitation under section 73(1) of the Finance Act. However, given the Tribunal's findings that the amounts in question were not taxable, the extended period of limitation was not applicable. Issue 4: Precedents and High Court Decisions The Tribunal relied on the Rajasthan High Court's decision, which had settled that the Corporation's activities did not fall under BAS. The Tribunal also noted that the Supreme Court had dismissed the department's Special Leave Petition against this decision. Therefore, the Tribunal found no justification for the demands confirmed by the Principal Commissioner. Conclusion: The Tribunal set aside the demands confirmed by the Principal Commissioner for both show cause notices and allowed the Corporation's appeal. The department's appeals to reinstate the dropped demands were dismissed. The Tribunal's order was pronounced on 03.07.2023.
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