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The Commissioner of Central Excise And Service Tax Versus M/s. Karan Agencies, Camp, M/s The Kolhapur Sugar Mills Ltd

2015 (12) TMI 93 - BOMBAY HIGH COURT

Business Support Service - owner allowed to use its entire infrastructure to the assessee - assessee was manufacturing and doing the business in the name of owner and received huge money as conducting charges - Held that:- Under the agreement, the Assessee agreed to pay to M/s. KSM an amount of ₹ 30 lacs towards use of infrastructure for manufacture of liquor. As per clause 2 of the agreement, all profits and losses in respect of the manufacturing and sale of the products in the distillery .....

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at the arrangement or deal in the present case is of such nature that M/s. KSM's distillery unit is taken over for conducting and managing by the Assessee. The Assessee is therefore responsible for any profits being generated or losses sustained. The nature of the transaction therefore would not fall within the meaning of support services for business or commerce. The conducting of the running business and its management and administration is therefore the basis of the finding. We are of the opi .....

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For the Respondent : Mr. V. Sridharan-Senior Adv with Mr. Prakash Shah and Mr. Jas Sanghavi ORDER P. C. This Appeal by the Revenue challenges the order passed by the Customs, Excise and service Tax Appellate Tribunal, West Zonal Bench dated 9th June, 2014 (CEXA/91/2015). 2) The Revenue submits that the following substantial question of law would arise for determination of this Court:- "Whether on the basis of facts and circumstances of the case, the activity conducted by the Respondent is .....

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ure by the Respondent for a consideration of ₹ 30 lacs per annum. The Respondent conducted entire business of manufacture of liquor, its sale and even effected the recovery of the sale proceeds in the name of M/s. KSM. The books of account were maintained in the name of M/s. KSM and sale proceeds were also credited to the account of M/s. KSM. At the end of each financial year, after settlement of accounts, the balance in Profit and Loss Account was paid by M/s. KSM to the Respondent after .....

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g charges towards the activities done by them during the financial year 2011-12. The Revenue contends that managing or conducting of such business is providing taxable service under the category of 'Business Support Service' classifiable under section 65(104C) of the Finance Act, 1994. 5) Since the Assessee did not register itself for payment of service tax nor it paid any service tax on the conducting charges, a show cause notice was issued demanding service tax of ₹ 71,02,197/-. .....

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Respondent merit taxability under the category referred above. It confirmed the demand along with interest and penalties were also imposed. Annexure 'D' is the copy of this order-in-original. 7) Aggrieved and dissatisfied with this order, the Assessee preferred an Appeal raising several grounds. It urged that the activity of managing the business is not taxable under the above category. That only services provided by the provider to a client will fall in 'business support service' .....

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. KSM. The Tribunal held that the activities of manufacturing and sale of liquor are conducted by the Assessee. The business support service covers only the services of supporting nature to main activity. Here, the main activity itself has been conducted and in these circumstances, the amount is not liable to be recovered. Pertinently, M/s. KSM paid service tax under the category of franchise services regularly and that is why the sum as demanded was not payable by the Assessee. 9) It is the cor .....

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hra has submitted that section 65(104c) refers to support services of business or commerce. This provision has been inserted by Finance Act, 2006 with effect from 1st May, 2006. These are services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules. Pertinently Mr.Mishra would rely upon the words managing distribution and logistics, oper .....

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terfered with. The finding and conclusion of the Tribunal is erroneous. The Tribunal's order is vitiated by non application of mind and error of law apparent on the face of the record. Therefore, this Appeal be admitted. 10) On the other hand, Mr. Sridharan, learned Senior Counsel appearing for the Assessee invites our attention to the agreement, copy of which is at Annexure 'A'. He submits that the owner of the entire infrastructure is M/s. KSM. The Assessee Respondent is a conducto .....

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products in the owner's distillery under the owner's licences on the terms and conditions mentioned and mutually agreed between the parties. Mr. Sridharan submits that the fixed fees and charges of ₹ 30 lacs for the use of infrastructure were to be paid. The balance and over and above this sum would be the income generated from this arrangement by the conductor Assessee and that was to be retained in terms of this agreement. Such an agreement, therefore, does not give rise to any .....

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d any service to M/s.KSM has no merit. The Assessee conveniently ignores the fact that the entire business i.e. purchase and sale were to be made in the name of M/s. KSM. M/s. KSM was doing work of accounting and the entire sale proceeds were initially credited in the account of M/s. KSM. The expenses were debited to M/s. KSM to arrive at the profit. Thus, it is not M/s. KSM which was providing any services, but it is the Assessee who was assisting M/s. KSM in terms of the agreement. Similarly, .....

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e before it and arising out of the order-in-original impugned by the Assessee was identical and therefore it allowed the Appeal. 13) In that main order, the Tribunal held that it has gone through the agreement. Under the agreement, the Assessee agreed to pay to M/s. KSM an amount of ₹ 30 lacs towards use of infrastructure for manufacture of liquor. As per clause 2 of the agreement, all profits and losses in respect of the manufacturing and sale of the products in the distillery division ar .....

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