2024 (3) TMI 1101 - CESTAT ALLAHABAD

Levy of service tax - Business Support Service - service of providing up-linking facility - classification of service - services of supply of DSNG Van to its clients can be classified and subjected to service tax under the category of Supply of Tangible Goods Service or not - time limitation - demand of interest - levy of penalties u/s 77 & 78 of FA.

Whether the service of providing up-linking facility will be taxable under the category of Business Support Service? - HELD THAT:- On examination of the terms of the contract between the appellant and their client it is clearly evident that appellant have provided the services which support the business activities of their client, by providing the uplinking facility from their teleport. Thus on merits these service would be classifiable under the category of business support services.

Whether the services of supply of DSNG Van to its clients can be classified and subjected to service tax under the category of Supply of Tangible Goods Service? - HELD THAT:- The agreement between the appellant and their customer is from the day one i.e. the day when it was entered into, was an agreement to provide these vehicles on rent to the appellant without transferring the effective control and possession of the vehicle to the customers - Hon’ble Supreme Court has in case of Adani Gases Ltd. [2020 (8) TMI 789 - SUPREME COURT] held that the supply of the pipelines and the measurement equipment (SKID equipment) by the respondent, was of use to the customers and is taxable under Section 65 (105) (zzzzj) of the Finance Act 1994 - there are no merits in the submissions made by the appellant in this respect and hold that the appellant has in fact provided the service under the taxable category of the Supply of Tangible Goods Services.

Whether the demand is barred by limitation? - HELD THAT:- The issue involved is purely of interpretation of the terms of agreement vis a vis the provisions of the Act. On going through the terms of agreement, the appellant were entertaining a bona fide belief that these service would not be classifiable under any of the taxable categories. There is nothing in the agreement to show that appellant could not have entertained such a belief. Also it is found that there has been dispute in respect of interpretation of the term “infrastructural support facility” used in the definition of Business Support Services. There are decisions which have held that the this term was restricted only to infrastructural support facilities, vis a vis the office maintenance facilities which have been out sourced. Thus it cannot be said that appellants could not have entertained such a belief - thus, extended period of limitation could not have been invoked for making this demand.

As the service tax is payable is under this category thus the demand will be restricted only to the extent it has been made within the normal period of limitation. To re-determine the same the matter needs to remanded back to the original authority.

Whether the penalties imposed under Section 77 & 78 can be justified? - HELD THAT:- As it is held invocation of extended period of limitation in respect of the demand made under the category of Business Support Services, the penalty imposed under Section in respect of this demand cannot be sustained. However in respect of the demand under category of Supply of Tangible Goods Services by invoking extended period of limitation as per proviso to Section 73 (1), which is upheld the penalty under Section 78 to that extent is upheld.

Interest - HELD THAT:- The demand for interest also upheld in respect of demands upheld.

Appeal allowed in part.