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2015 (12) TMI 93 - BOMBAY HIGH COURT

2015 (12) TMI 93 - BOMBAY HIGH COURT - 2016 (41) S.T.R. 161 (Bom.) - 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 re .....

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. Its clauses have been read together and harmoniously to conclude that 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 ad .....

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And B. P. Colabawalla, JJ. For the Appellant : Mr. Jitendra B. Mishra 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 ci .....

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inery is owned by M/s. KSM, who allowed to use the entire infrastructure 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 .....

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ed an amount of ₹ 6,89,53,366/- from M/s. KSM against conducting 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 c .....

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dated 20th December, 2013 holding that the services provided by the 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 th .....

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n record to suggest that the Assesee had received any amount from M/s. 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 .....

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d within the meaning of the said definition which is taxable. Mr. Mishra 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.Mishr .....

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ld submit that the order-inoriginal therefore should not have been interfered 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 ent .....

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conduct the owner's business of manufacturing and selling of the 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 thi .....

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he footing that the Assessee's contention that it had not provided 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 Asses .....

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unal, vide order dated 20th May, 2014, set aside the demands. The case 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 .....

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