TMI Blog2010 (12) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... e department to lay necessary factual foundation in that regard in the show cause notice. – Order traveled beyond the scope of SCN Unless the service recipient is shown to have been engaged in rendering some service to others and the service provider is shown to have rendered his service for promotion or marketing of such service provided by the service recipient to others, the question of creating liability under the said Act in terms of Section 65(19) (ii) read with 65(105) ( zzb ) of the said Act does not arise. - the allegation or charge in that regard relates to the sale of immovable properties or the developed properties or the constructed project by Sahara Corporation. It does not relate to any service rendered by Sahara Corporation to others in relation to the sale of such properties or projects. Merely because the debit notes speak of charges being paid for the services according to the agreement between the parties that by itself would not be sufficient to conclude that the activity in the form of display of logo would be the business auxiliary services within the meaning of the said expression, unless it is established that the activity of Sahara Corporation is serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , for such services rendered by them, investigations were initiated. In the course of investigations, various documents came to be recovered and scrutinized, and various statements of the persons in the administration of the appellants company as well as in the service recipient company came be recorded. Pursuant to the said investigation, a show cause notice dated 28.10.2008 came to be issued to the appellants to bring them to the fold of levy of service tax under the said Act in respect of Business Auxiliary Services stated to have been provided by the appellants to M/s Sahara India Commercial Corporation Ltd. herein after referred to as Sahara Corporation , for the period from July, 2003 to January, 2007 hereinafter called as the relevant period . The same was contested by the appellants and ultimately, 'the impugned order came to be passed. M/s Sahara Airlines Ltd. was taken over by the appellants vide their purchase agreement dated 18.1.2006 and therefore henceforth, the expression the appellants' shall also include and refer to M/s Sahara Airlines Ltd, unless otherwise the context requires. 4. While confirming the demand of service tax against the appellants, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered as inclusive of service tax and whether the payment of interest was warranted. 5. The impugned order is sought to be challenged on several grounds. It is assailed on the ground that the findings arrived at by the learned Commissioner in the impugned order are beyond the scope of the show cause notice. The appellants merely displayed logo of the group of companies and the appellants were part of the said group and were not rendering any service to Sahara Corporation and in any case, the activities for which the Agreement in question was executed did not relate to any service as such rendered by Sahara Corporation to its customers and hence the appellants could not have been charged of having rendered service in the nature of business auxiliary services within the meaning of the said expression under the said Act. Considering activity of the appellants in terms of the Agreement in question, the same being exclusively relating to display of logo, it can not be said to have been covered by the definition of the business auxiliary service. The entries pertaining to the services of brand promotion and sale of space have been introduced in the said Act subsequent to the relevant p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said logo and copies of writing pads, newspaper advertisement using the said logo. According to the learned Senior Advocate bare reading of the impugned order along with show cause notice would disclose that the Commissioner clearly travelled beyond the scope of the said notice. The findings that the construction/development of immovable properties would constitute service and the said view gets support from Appendix X of Hand Book of Procedure of Foreign Trade, that the real estate services of construction/development of residential and commercial projects would qualify as the services pertaining to the immovable properties and the same was evident from their balance sheet and that Sahara Corporation had obtained registration for various services and further that for the purpose of classifying of service under the business auxiliary service, it is not necessary that the services rendered should be taxable services are not at all borne out from the show cause notice nor even spelt out therefrom. The only charge which was made against the appellants under the show cause notice was mere reproduction of the language of the agreement dated 30.3.1995. The findings relating to the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness activities of Sahara Corporation. The records placed before the authorities clearly established that, besides the sale of immovable properties, Sahara Corporation was providing a number of services and the same is evident from the balance sheet of the said company. Besides, the said company is also registered with the Department for the purpose of service tax and as per the registration certificate issued in Delhi and Pune, the company can provide a number of services. He further submitted that the language of the agreement clearly reveals that Sahara Corporation wanted the appellants to give extensive publicity to their activities in order to promote their business and area of operation. Clause (6) of the agreement provides for obligation of the appellants and popularize the schemes of the business of Sahara Corporation and for that purpose to increase exposer to the general public. The show cause notice clearly refers to various documents and statements. Taking us through those documents and statements, particularly the relevant portions thereof, the DR submitted that the same clearly reveal all the necessary materials which justify the findings arrived at by the adjudica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted or marketed by the service provider, the activity of the service provider cannot be classified under the category of Business Auxiliary Services under the said Act. He further submitted that activities of construction and sale of immovable property do not amount to services under the said category under the said Act. Infrastructure and the real estate projects carried out by the Sahara Corporation do not qualify as the services at all. Drawing our attention to the letter dated 10.9.2004 of the Ministry of Finance, it is sought to be contended that the same clarified that the builder constructing for himself does not render any service as such. The said position was reiterated in the Circular dated 1.8.2006 wherein it was clarified that if no other person is engaged in construction work and the builder/promoter or developer undertook construction work without engaging services of any other person, then in such cases in the absence of relationship of service provider and service recipient, the question of providing any service, including taxable services, to any person by any other person, does not arise. The entries relating to construction service apply to the builders engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering any service of promotion or marketing of any service provided by their client. There has essentially to be a service provided by the client and it is only thereupon question of promotion and marketing of such service could arise. 9. On the other hand, while countering the said argument, the DR submitted that plain reading of the agreement and the resolution of the company would disclose that the activity which was carried out by the Sahara Corporation was nothing but service and the same was specifically admitted by the appellants as well as Sahara Corporation. Taking us through the agreement in question, the DR submitted that it specifically speaks of what is expected from the appellants for the purpose of exclusive publicity of the activity of the Sahara Corporation. It clearly speaks of need to give extensive publicity to the activities of Sahara Corporation in order to promote their business and area of operation. The resolution by the Sahara Corporation clearly reveals that they had decided to utilize the services of the appellants for promoting their business and in consideration thereof, the appellants were to receive certain amount per passenger. Referring to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omotion of real estate business of Sahara Corporation. The sole object as envisaged by the agreement dated 30.3.95 was that of promotion of the services rendered by the client of the appellants. It is pertinent to note that the amount paid in consideration thereof varied according to the length of the flight and the long distant flight got higher remuneration as compared to the short distant flight and therefore, the exposer time to the marketing message was the key. The mere use of logo served no useful purpose is inconceivable and no monetary consideration would have been paid without any purpose or motive. Close to Rs.1,045 crores were not paid to the appellants as charity but essentially for promoting and marketing the services of Sahara Corporation. 10. Further, referring to subsequent entry in relation to the activity of brand promotion/sale of space introduced by way of amendment to the said activity, it is sought to be contended on behalf of the appellants that the activity of the appellants could at the most be covered under entry brand promotion under entry No.(zzzzq) of Section 65(105) and sale of space under the entry No.(zzzm) of Section 65(105) of the said Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in 1994 (73) ELT 257 (SC); Padmini Products vs. C.C.E . reported in 1989 (43) ELT 195; Gufic Pharma Pvt. Ltd. Vs C.C.E ., Vadodara reported in 1996 (85) ELT 67 maintained by the Supreme Court reported in 1997 (93) ELT 187; Cosmic Dye Chemical vs. C.C.E ., Bombay reported in 1995 (75) ELT 721. It is therefore, sought to be contended that there was no justification to invoke the longer period of limitation. 13. On the other hand, the DR has submitted that the appellants have not placed on record any fact which could justify to claim of bona fide belief. All the documentary evidence and the statement recorded clearly reveal that the appellants were fully aware that they were rendering services to Sahara Corporation for promoting and developing services rendered by the said company. The appellants were armed with necessary logistic and infrastructure and had sufficient access to the knowledge of law relating to service tax. They were duly registered for the purpose of service tax, besides they had also obtained opinion from Chartered Accountant. It is another thing that in the process of obtaining opinion they had manipulated the date of opinion. There is a clear admission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi and they are having registered office at New Delhi and therefore, there is no substance in the ground sought to be raised in the matter. 17. Lastly, the appellants seek to dispute the liability of interest and penalty. According to the appellants they were under bona fide belief that mere display of logo which was also similar to the appellants predecessors name would not amount to rendering any services and there existed a reasonable cause for the appellants not to pay service tax on such activity and hence no interest or penalty is warranted. On the other hand, the DR submitted that once it is established that the appellants failed to pay tax in time, the liability of interest is bound to follow and for the same reason, penalty also. 18. In support of his submissions the DR sought to rely upon the decisions in the matter of UOI vs. Martin Lottery Agencies Ltd. reported in (2009) (14) STR 593; Tata Consultancy Services vs. State of Andhra Pradesh reported in 2004 (178) ELT 22; Hotel Restaurant Association vs. Star India Pvt. Ltd. reported in 2007 (5) STR 161 (SC); Tata Iron and Steel Co. Ltd. Vs. C.C. reported in 1993 (66) ELT 622; Commissioner of Central Excise, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or whether such entries could be held to be forming part of the Business Auxiliary Services for the period prior to the introduction of such specific entries in the said Act? (iv) Whether the authority who issued the show cause notice lacked territorial jurisdiction to deal with the matter? (v) Whether the show cause notice was barred by limitation and there was no justification for invocation of extended period of limitation? (vi) Whether the demand for interest is justified? (vii) Whether the facts of the case warranted imposition of penalty? 20. At the outset, it is sought to be contended that the Commissioner traveled beyond the scope of the show cause notice. While dealing with the scope of the show cause notice, it would be also necessary to ascertain the scope of the charge in the show cause notice as well as that of the agreement dated 30.3.1995 which is the basis for the charge of service tax against the appellants. 21. The show cause notice referring to the agreement dated 30.3.1995 specifically recorded that the perusal of the said agreement disclosed that the same was entered into to promote the business and to extend area of operation of Sahara Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per passenger ticket for the services provided by them. It was further observed in the show cause notice that Sahara Corporation was developing various real estate projects and for promotion of those projects they utilized the services of the appellants and paid them for the services rendered. In terms of the said agreement, the appellants displayed the logo of Sahara Corporation on various materials as agreed and received remuneration for the same from Sahara Corporation which was collected depending upon the number of persons traveled in the appellants airlines during the relevant period and depending upon the distance they had traveled, and thus the appellants rendered Business Auxiliary Services within the meaning of the said expression under the said Act and therefore are liable to pay the service tax. 23. The contention that the Commissioner has traveled beyond the scope of show cause notice is sought to be made good by referring to the findings in the order to the effect that the construction and development of immovable property would constitute service and that the said view gets support from Appendix X of the Handbook of Procedure for Foreign Trade that therefore the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department cannot travel beyond the show cause notice. 29. Undoubtedly, the statements of various persons particularly of Shri R.S . Dubey , Shri O.P . Srivastava and Vandana Bhargava read in proper prospective would reveal that the Sahara Corporation was engaged in the business of development of immovable properties and in construction of projects. It is also clear from the records that the promotion of such activities was thought to be made through the appellants and their predecessor and for that purpose the agreement dated 30.03.1995 was entered into. In terms of the agreement, the logo of Sahara Corporation was displayed on different items as agreed upon in consideration of receipt of amount paid by Sahara Corporation calculated on the basis of number of passengers and the distance traveled by them. In this regard, the show cause notice and the materials on record are clear and the findings on those aspects cannot be said to be beyond the scope of the show cause notice. 30. However, considering the allegation in the show cause notice, and the scope of charge thereunder, certainly the findings to the effect that the construction and development of immovable properties wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope for rendering various services by Sahara Corporation, no material has been placed on record which could show any activity by Sahara Corporation which could reveal rendering of any of those services by Sahara Corporation. 32. The show cause notice is essentially based on the agreement dated 30th March 1995. Undoubtedly, in support of charge, apart from the said agreement, various other documents and statements of various persons are relied upon. From all the materials on record it has been clearly established and, rather has been fairly conceded by the learned Advocate for the appellants, that the fact that logo by name SAHARA was displayed by the appellants on the materials like boarding passes, tickets, baggage tags, etc. as also on the aircraft, writing pads, newspaper advertisements is not in dispute and that the same was in terms of the agreement dated 30.03.1995. Apart from the same, according to the appellants, the department has not produced any other material which could reveal any other activity of rendering of any taxable service as such by the appellants and much less the services which could fall in the category of Business Auxiliary Services. On the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refer to the discussions of the undersigned had with your Director, Shri Subrata Roy Sahara , on the above matter in several meetings. What we want your AirLines to do, is to give extensive publicity to our activities in order to promote our business and area of the operations. We confirm that the following arrangements have been arrived at with you by us: All your Aircrafts will have exactly the same logo and in the same colour as used by us and the same will be prominently displayed outside of both sides of each and every aircraft in the manner that the same is clearly visible to general public at least from the distance of 200 metres . (1) You will use our logo and its colour scheme on all your tickets, Boarding Passes, Baggage tags, publicity materials and advertisements in newspapers, hoardings, etc. (2) Our brouchers (to be supplied by us) will have to be distributed with each ticket issued by you. (3) You have agreed to make other arrangements required from our side to popularize our business as may be intimated by us to you after mutual consent. (4) Since the publicity is mainly, directly linked with the tickets issued by you and / or passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere never implemented. Though in the course of arguments the DR had sought to dispute the claim, we have not been pointed out any evidence which could reveal enforcement of both those terms. It should not be forgotten that the service tax is to be levied in relation to the service either provided or to be provided. Mere clause in agreement which discloses the intention of the parties for performance of some acts and deeds cannot be by itself lead to conclusion about enforcement of such clause unless some evidence in that regard is produced. Neither the impugned order refers to any such material which could reveal enforcement of those two terms nor any material on record has been pointed out which could establish the same. In such circumstances we are left with no alternative than to accept the case put forth by the appellants that the said terms regarding brouchers was never enforced. In fact, we find such claim having been made even in reply to the show cause notice. Being so it was necessary for the department to counter the same by sufficient material. We do not find any such material on record. 38. As regards other arrangements for publicity of business of Sahara Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the main objects which are required to be pursued by the company. It would certainly disclose various fields in which company can have its activities. That itself, however, would not disclose that the company was engaged in all those activities nor the same could disclose rendering of any service as such by the appellants. Besides, even assuming that company's objectives are to render services in the nature of development and construction of immoveable properties, it is necessary to establish that the activities carried out by the appellants were in the nature of rendering service for promoting and marketing of the service of development and construction of Sahara Corporation to others in order to sustain the demand of service tax against the appellants for having rendered Business Auxiliary Services to Sahara Corporation. Mere Memorandum Article of Association by itself cannot be of any help in this regard. 42. As far as Balance Sheet is concerned, it merely relates to rental space as well as receipts from rooms/restaurants and contract work. It has not been established by the department that contract work referred to in the balance sheet was in relation to any developm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i , dated 17.12.08 by various authorized signatories of the appellants , dated 18.9.09 by Saroj K. Dutta , dated 26.5.08 also by Shri Saroj K. Dutta and letter the dated 3.1.08 by Shri R.S . Dubey were also relied and referred to. Besides, the attention was also drawn to the registration certificate of the appellants under the said Act, the opinion dated 4.8.03 by Shri S.S. Gupta, C.A. and to the details of payments made by Sahara Corporation to the appellants. 45. The letter dated 18.12.07 by Shri R.S.Dubey is merely in response to the letter to Senior Intelligence Officer, Kanpur asking certain information in the course of investigation. The letter dated 25.3.04 by Shri J.B.Roy is merely informing about the right of Sahara Corporation to revise the charges payable under the agreement. Similar are the letters dated 23.3.04, 31.3.02, 24.3.2000, 30.6.98 and 30.3.96 merely confirming the payment of the charges in terms of the agreement. 46. The letters dated 23.6.08 by Shri R.S . Dubey to Shri P.K . Tripathi was in relation to the information furnished to the Department that apart from the agreement dated 30.3.95, Sahara Corporation had entered into an agreement relating to loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the quantum of amount payable under the agreement. 54. If we take into consideration all the above referred documents together they undoubtedly disclose the understanding which was arrived at between the appellants and Sahara Corporation for display of latters logo on various materials and for that purpose the appellants were to receive certain remuneration from Sahara Corporation and was accordingly paid by Sahara Corporation. Apart from the above documents, attention was drawn to the statements of various persons recorded in the course of investigation. 55. Shri O.P. Srivastava had stated in his statement dated 27.5.08 that Sahara Corporation was engaged in housing, real estate and infrastructure business. In the year 1993 the Sahara Corporation had launched various projects of housing and real estate, and therefore, the passengers of Sahara Airlines were to be targeted for sale of those projects. It was thought appropriate to provide publicity of various projects through Sahara Airlines to increase the area of operation of Sahara Corporation and since the Airlines agreed to advertise their projects, it was decided to reimburse them for such activity by them and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts by Sahara Corporation. The project comprised of residential and commercial complexes. The parties had also agreed that there could be other arrangement to popularize the business of Sahara Corporation on intimation in that regard by Sahara Corporation and by way of mutual consent. Equally it is established that the appellants in furtherance of such agreement displayed the logo and to that extent were duly compensated by payment on the basis of number of passengers travelled in the airlines of the appellants. To that extent, certainly, the appellants were engaged in conducting some activity for Sahara Corporation. However, the question which calls for determination is whether such activity amounted to taxable service and whether it falls in the category of business auxiliary service within the meaning of the said expression under the said Act. 60. The analysis of all the materials on record disclose that three factors have been clearly established. One that Sahara Corporation was engaged in the business of development of immovable properties and project buildings and sale thereof. Secondly, the parties had entered into an agreement for promoting the said business of Sahara Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the nature of development and construction and sale thereof to others by Sahara Corporation, for which the appellants had agreed for promotion and marketing thereof, were the services within the meaning of said expression under the said Act. It is the contention of the appellants that the activities carried out in the nature of development and construction by Sahara Corporation were not in the form of services to others but those were activities for their own benefit so that they could sell the developed or constructed properties and the sale of the properties do not include element of service. On the other hand, it is the contention of the department that such activities amount to render service to others and, hence, the provisions of Section 65(19)(ii) read with Section 65(105)( zzb ) are squarely attracted. 65. As already stated above, the term Service has not been defined under the said Act. In Black's Law Dictionary the term service has been defined to be an act of doing something useful for a person or a company for a fee. The expression service charges is defined therein to mean charge assessed for performing of service, such as charges assessed by bank aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaining to immoveable properties of Sahara Corporation and that too by merely displaying the logo of the Sahara Corporation. Therefore, the same would not fall within the category of Business Auxiliary Services within the meaning of the said expression under the said Act. Heavy reliance is sought to be placed in that regard in the decision of Gauhati High Court in Magus Construction case as also of the Apex Court in the matter of Larsen Tourbro . The contention is seriously disputed on behalf of the department. 67. It was sought to be contended that in view of undisputed facts and admissions on behalf of the appellants, it was not necessary for the department to place on record any material in support of their allegation about rendering the Business Auxiliary service in the form of sale as well as renting and maintenance of immovable properties by the Sahara Corporation. The contention is totally devoid of substance. Firstly, there is no such admission by any person on behalf of the appellants. Secondly, in case of classification burden was squarely upon the department. Besides, there is nothing filed on record to establish that the activity of sale of immovable properti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice only and not on service provider . A service provider is only a means for deposit of the service tax to the credit of the Central Government. Although the term service receiver has not been defined in the Finance Act, 1994, the service receiver is a person, who receives or avails the services provided by a service provider . 31. From the provisions of the law extracted hereinabove, it becomes abundantly clear that the burden of registration and payment of service tax is on the person, who provides taxable service to any person. According to the petitioner-company, it does not provide any taxable service to any person so as to warrant its registration under the Finance Act, 1994, and/or to pay any service tax thereunder. Any part of constructional activity for construction of building, which is carried out by the petitioner-company, is not a service rendered to any one, but an activity, which is carried out by the petitioner-company, for its own self. Since the very concept of rendering of service implies two entities, one, who renders the service , and the other, who is recipient thereof, it becomes transparent that an activity carried on by a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r undertakes construction work on its own without engaging the services of any other person, then, in such cases, in the absence of a relationship of service provider and service recipient , the question of providing taxable service to any person by any other person does not arise. The relevant portion of the circular, dated August 1, 2006 , is reproduced below : Sl. No. Issue Legal osition 1. Is service tax applicable on builder, promoter or developer who builds a residential complex with the services of his own staff and employing direct labour or petty labour contractors whose total bill does not increase 4.0 lacs in one financial year ? In a case where the builder, promoter or developer builds a residential complex, having more than 12 residential units, by engaging a contractor for construction of such residential complex, the contractor shall be liable to pay service tax on the gross amount charged for the construction services provided, to the builder/promoter/ developer under construction of complex service falling under Section 65(105)( zzzh ) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construct flats/apartments not for and behalf of prospective allotees but otherwise, and the subject title and interest in the construction continues to remain with the assessee till the date of sale. 76. In Larsen Toubros Ltd . case the Apex Court after considering the K. Raheja Development case observed that it was difficult to accept the proposition laid down in K. Raheja Development case and that the view taken in the said decision requires re-consideration by the Larger Bench. The matter stands referred to a Larger Bench. 77. The discussion on the point in issue would be incomplete without reference to some more decisions of the Apex Court, and they are Tamilnadu Kalyan Mandapam Association vs. Union of India reported in 2006 (3) STR 260, Fakir Chand Gulati vs. Uppal Agencies Private Limited reported in 2008 (12) STR 401, Home Solutions Retail India Limited vs. Union of India reported in 2009 (14) STR 433, Association of Leasing Financial Service Companies (supra), All India Federation of Tax Practitioners vs. Union of India reported inBharat Sanchar Nigam (supra) and Gannon Dunkerlays case. 78. In Tamilnadu Kalyan Mandapam Association case, the Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmission to construct and sell other floors of the building is to adjust the value to the extent of land to be transferred to the builder, the important aspect is the availment of services of the builder by the land owner for house construction for a consideration. To that extent, the land owner would be a consumer and the builder to be a service provider. 80. In Home Solution case, the point for consideration before the Apex Court [this was not a decision of the Apex Court but was that of the Delhi High Court-editor] was whether the Finance Act, 1994 envisages the levy of service tax on letting out / renting out of immovable property per se. The Apex Court after referring to various relevant provisions of the said Act as well as taking into consideration the various reported decisions including Kalyan Mandapam Association case held that the Supreme Court in Kalyan Mandapam case had held that the service of a Mandap Keeper does not involve transfer of movable property nor does it involve a transfer of any immovable property of any kind known to law either under the Transfer of Property Act or otherwise and therefore, the said activity could be only classified as a service. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion relating to non banking financial companies and financial institutions. Section 45-I(c) of RBI Act treats financing as an activity. Those activities are regulated by Reserve Bank of India. The expression financial institution means any non banking institution which carries on as its business and activity inter-alia of financing, whether by way of making loans or advances or otherwise. Under notification dated 2.1.1998, the deposit taking activities of non banking financial companies were also sought to be regulated. Similarly, under RBI guidelines dealing with the accounting for investments, the non banking financial companies having not less than 60% of the total assets in lease and higher purchase and deriving not less than 60% of their total income from such activities can be classified as higher purchase/ equipment leasing companies. The Apex Court further observed that the significance of the said circulars and guidelines is to show that the activities undertaken by non banking financial companies of equipment leasing and hire-purchase finance are facilities extended by non banking financial companies to their customers. They are financial services rendered by such non ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The value addition is on account of the activity which provides value addition, for example, an activity undertaken by a Chartered Accountant or a broker is an activity undertaken by him based on his performance and skill. This is from the point of view of the professional. However, from the point of view of his client, the Chartered Accountant /broker is his service provider. The value addition comes in on account of the activity undertaken by the professional like tax planning, advising, consultation etc. It gives value addition to the goods manufactured or produced or sold. Thus, service tax is imposed every time service is rendered to the customer/ client. The Apex Court further held that every tax may be levied on an object or on the event of taxation. Service tax is, thus, a tax on activity whereas sales tax is a tax on sale of a thing or goods. Having held so, it was also ruled that: A contract of sale is different from an agreement to sell and unlike other contracts, operates by itself and without delivery to transfer the property in the goods sold. The word sale connotes both a contract and a conveyance or transfer of property. The law relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir user. They are not delivered, stored or possessed. Nor are they marketable. They are merely the medium of communication, what is transmitted is not an electromagnetic wave but the signal through such means. The signals are generated by the subscribers themselves. In telecommunication what is transmitted is the message by means of the telegraph. No part of the telegraph itself is transferable or deliverable to the subscribers. It was ruled that the electromagnetic waves are not 'goods' within the meaning of the word either in Article 366(12) or in the State Legislation . It was further observed that it is not in the circumstances necessary for us to determine whether telephone system including the telephone exchange was not goods but immovable property as contended by some of the petitioners . It was further held that a telephone service is nothing but a service. There is no sale element apart from obvious one relating to the hand set if any. That and any other accessory supplied by the service provider in our opinion remain to be taxed under the State Sales Tax Laws . It was also held that the nature of the transaction involved in providing the telephone connection m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch service recipient, and only then it could be said that the service provider had provided Business Auxiliary Service by promoting or marketing such services of the service recipient. Needless to say that to establish such facts, it is primarily necessary to have a clear charge in that regard with the factual foundation in the show cause notice to give proper and fair opportunity to the assessee to meet the case of the department and thereupon to establish such charge in the course of adjudication proceedings. As far as the case in hand is concerned, as already seen above in relation to the service aspect is concerned, the allegation or charge in that regard relates to the sale of immovable properties or the developed properties or the constructed project by Sahara Corporation. It does not relate to any service rendered by Sahara Corporation to others in relation to the sale of such properties or projects. 87. The relevant material to support the allegation regarding rendering of business auxiliary service by the appellants to Sahara Corporation brought on record is the factum of display of logo of Sahara Corporation on various items specified in the agreement. The logo undoub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of display of logo would be the business auxiliary services within the meaning of the said expression, unless it is established that the activity of Sahara Corporation is service to others and the activity of display of logo has resulted in promotion and advertisement of such service of Sahara Corporation. The contention that the appellants have not produced any evidence to show that logo did not promote the business is totally devoid of substance in as much as that the burden to prove the classification and to bring the assessee within the net of tax primarily lies upon the department. Failure of the department to establish the basic ingredient to prove the charge against the assessee can neither shift the burden, nor can give any advantage to the department. 89. Another important point sought to be canvassed relates to the entry relating to sale of space or time for advertisement and a brand promotion under entry 65(105) (zzzzq) and 65 (105) (zzm). It is sought to be argued that when a subsequent entry is enacted with specific and precise description of an activity without changing the existing entry, it is to be presumed that such existing entry did not cover the newly enacte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly by the property owner or a contractor who does not have a business establishment would not be subject to service tax. The contents of the above quoted para from the said letter apparently disclose that it was the understanding of the Government itself that if the builders construct the building or construct for themselves either for their own use or to rent it out or for selling it subsequently, then they do not render any taxable service as such. In other words the sale of an immovable property does not include service element and that is the understanding of the Government itself which is revealed from the said letter. 91. Equally the learned Advocate for the appellants is justified in referring to the Circular dated 26.02.2010. Therein under the caption service tax on construction services in para 8.2 it was stated thus:- As regards payment made by the prospective buyers / flat owners, in few cases the entire consideration is paid after the residential complex has been fully developed. This is in the nature of outright sale of the immovable property and admittedly no service tax is chargeable on such transfer. However, in most cases, the prospective buyers boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Business Auxiliary Service (BAS). This is now being introduced as an independent entry in the list of taxable services Referring to this observation, it is sought to be contended and not without justification that display of logo could not be said to be part of business auxiliary services as in relation to the display of logo there is a specific entry introduced under the amendment brought in the year 2010. Referring to the caption promoting a brand of goods service even business entity etc. attention was drawn to para 4.2 of the said circular. Indeed it clearly states that it is important to note that promotion or marketing of sale of goods produced, provided or belonging to a client and promotion or marketing of services provided by the client are already covered under the business auxiliary services. Such activities would continue to remain classified under BAS. The difference between the services classifiable under BAS and the newly proposed service is that the latter has a wider coverage in the sense that mere promotion of a brand would attract tax under this service even if such promotion cannot be directly linked to promotions of a particular product or service . 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brand would attract tax under this service even if such promotion cannot be directly linked to promotions of a particular product or service. 96. Evidently the new entry deals with a specific subject which relates to promotion of a brand even though the same may not directly have any link to the promotion of the service itself. Evidently, therefore, the original entry Business Auxiliary Service did not include the activity in the form of promotion of brand unconnected with the promotion of particular service as part of the activity under the said category. The letter therefore rather then lending any support to the defence by the department, it conveys the meaning of the existing entry to be contrary to the arguments advanced on behalf of the department. 97. In Board of Control for Cricket Control in India , the Tribunal while dealing with the entry sale of spare or time for advertisement and sponsorship services which was introduced in the said Act w.e.f . 1.5.2005 had observed that we find that a subsequent entry having been enacted covering the activity without any change of the existing entry, has to be interpreted as if the earlier existing entry did not cover the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This has been held to indicate that prior to 16.06.2005, such services were not included in the category of interior decorator service. It was further observed that in series of decisions of the Tribunal which laid down law that if the category of series is brought into service net from a specific data, such services would not be covered under any other category of services. Reliance is placed in the decision in the matter of Chennai Telephones ( BSNL ) vs. Commissioner of C. Ex. Chennai reported in 2006 30 STR 227 wherein it was held that levy of leased circuit service was introduced only from 16.7.2001 and, therefore, it was not proper to demand service tax on the said services for the earlier period. Reference was also made to the case of Jet Airways (India) Ltd. vs. Commissioner of Service Tax, Ahmedabad reported in 2008 (11) STR 645 (Tri. Ahmd .) wherein it was held that once a new entry is introduced with effect from a particular date without disturbing already existing entries, it has to be held that new entry was not covered by the previous entry. The Tribunal therein had relied upon its earlier decision in the matter of Board of Control for Cricket in India vs. C.S.T . Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had attempted to classify the ERP services under management consultancy service while the Tribunals decision were categorical on the point that such services would fall under the category of consulting engineering services. However, they were excluded from the scope of consulting engineering services by virtue of an exemption Notification No. 4/99-ST dated 28.2.1999. It was observed that once a particular service is excluded from the scope of the service tax where it normally is supposed to fall then it cannot be taxed under some other category. While observing that the assessee had clearly shown that prior to 16.5.2008, the services rendered by the assessee were excluded from the scope of consulting engineers service, the judicial pronouncement disclosed that it was not covered under the management consultancy services and as the information technology services came within the framework of the service tax only from 16.5.2008, therefore, it was held that the services in question for the relevant period could not have been subjected to payment of service tax. The said decision was not interfered with by the Apex Court as the appeal was dismissed. 101. Indeed the appellants are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrelevant for the relevant period as for the said period, taking into consideration the nature of the entry, it was for the department to establish the positive effects of display of logo and it was not for the assessee to prove the negative. The burden to establish the charge was squarely upon the department which it failed to discharge. 105. In Martin Lottery while dealing with the question as to whether sale promotion and marketing of lottery tickets would be exigible to service tax within the meaning of the provisions of Section 65(105) of the Finance Act, 1994, reference was made to the explanation clause inserted in the sub-clause (ii) of Section 65(19) w.e.f . 16.5.2008. The explanation provides that for removal of doubt it is hereby declared that the purposes of this sub-clause service in relation to promotion or marketing of service provided by the client includes in service provided in relation to promotion or marketing of games of chance, organized, conducted or promoted by the client, in whatever name called, whether or not conducted online, including lottery, lotto, bingo. Having referred to the said explanation clause, it was observed that the core question which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellants they were paid money calculated on the basis of number of passengers traveled through the said airlines and the charges were revised upward from time to time by mutual consent. The activity of the appellant having comprised of mere display of logo of Sahara Corporation on various items as agreed, and the entry relating to mere display of logo resulting in promotion and marketing of the business of the client having been introduced subsequent to the relevant period, it could not be said to have been part of Business Auxiliary Service during the relevant period and in any case the activity of Sahara Corporation being in the nature of sale of immovable properties either developed and/ or constructed or built premises therein did not amount to rendering services as such, either taxable or otherwise, to others, within the meaning of the expression used in the category of Business Auxiliary Service under the said Act, the said activity by the appellants does not fall within the category of Business Auxiliary Service under the said Act, and hence there was no liability upon the appellants to pay any service tax for such activity by them during the relevant period under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plain. When an expression is capable of more than one meaning, efforts should be to resolve that ambiguity in a manner consistent with the purpose of the provisions and having regard to the consequences of the alternative construction. So long as natural meaning of charging section is adhered to and law is certain, then a strange meaning thereto should not be given. It was further held that a goods may be tangible property or an intangible one. It would become goods provided it has the attributes thereof having regard to (a) its utility; (b) capable of being bought and sold; and (c ) capable of being transmitted, transferred, delivered, stored and possessed. If a software whether customized or non- customised satisfies these attributes, the same would be goods. 113. In Star India Private Limited, the Apex Court held that a definition of a term in one statute cannot be used as a guide for construction of a same term in another statutes particularly in a case where statute have been enacted for different purposes. 114. In Slotco Steel , it was held by the Tribunal therein that if the party itself fails either by way of some positive act in that regard or even by failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that acquiring knowledge by the department does not take away the period of five years provided by the law makers in the Act itself, particularly when the suppression of fact is with intent to evade the payment of duty. 121. In Kerala State Electricity Board case, the Apex Court held that the provisions regarding the liability to pay the interest is enforceable if the person liable to pay the service tax fails to pay the same when it falls due. 122. In Lubri-Chem Industries vs. Collector of Central Excise, Bombay reported in 1994 (73) ELT 257 (SC), it was held that the extended period of five years is not to be invoked unless there is something more positive then mere inaction or failure on the part of the assessee or conscious or deliberate withholding of information. 123. In State of Tamil Nadu vs. M.K . Kandaswami and Others reported in (1995) 4 Supreme Court Cases 745 it was ruled that while interpreting taxing statute a construction which would defeat its purpose and effect should be avoided and if more than one construction is possible, then the one which preserves its workability and efficacy is to be preferred. 124. In Indo-China Steam Navigation case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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