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2016 (9) TMI 1024 - CESTAT NEW DELHI

2016 (9) TMI 1024 - CESTAT NEW DELHI - 2017 (47) S.T.R. 41 (Tri. - Del.) - Service tax liability - revenue sharing arrangements - Whether or not the appellants rendered any taxable services under the category of BAS and if so whether the demand has been made within the permissible time limit in terms of Section 73 - full value of consideration for taxable service as received by RSIC from various ICD users has suffered service tax and RSIC remitted the same to the Government - Held that:- it is c .....

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able services under the category of BAS. The argument of the appellants that there is no service tax liability in cost/revenue sharing arrangement is not tenable in terms of clear wordings of the agreement and intention of the contracting parties as clearly manifested therein. - The revenue sharing model which was discussed in Board's circular dated 23/2/2009 was w.r.t. movie distribution. In any case the said circular was further clarified vide Circular dated 13/12/2011 wherein it was ment .....

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ration for services rendered by itself will not decide the tax liability of the service. In the present case there is a taxable service rendered by the appellant. - Admittedly the considerations received by appellants are for services. These are taxable services. RSIC paid service tax on the gross income and out of that income they have paid some amount to the appellant and, hence, the plea that the appellants are not liable to service tax is not supported by any legal principle. The fact is .....

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f service tax by RSIC by itself will not exclude the tax liability of appellants, Apparently the tax liability on the appellant confirmed in the present proceedings is only w.r.t. the consideration received by them and not on the gross value received by RSIC. There is no double taxation in the present case. - It is found that the appellant is having a strong ground regarding the question of time bar. It is to be noted that all invoices, for full consideration, have been raised by RSIC and th .....

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ubject matter of interpretation by the Tribunal and High Courts. In fact the earlier Circular issued by the Board, covering the period prior to the introduction of Cenvat Credit Rules gave an impression that when the main service provider discharged the service tax on gross value there may not be tax liability on the sub-contractor rendering similar service to the main contractor. The Tribunal in various cases held in such a case involving interpretation of law and also a bonafide belief regardi .....

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lso perused the reasons recorded by the Original Authority for invoking extended period of demand. He recorded that but for the Department's investigation the non-payment of tax would not have come to the notice. Further, the balance sheet for certain years have not been furnished in time by the appellant which was obtained from Registrar of Companies. As such, it was held that the appellants willfully suppressed material facts. We find that the service tax demand against the appellant was sough .....

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source agreement. As such, we find the demand for extended period is not sustainable in the present case. - Appeal disposed of - Service Tax Appeal No. 829 of 2012 - Final Order No. 53175/2016 - Dated:- 23-8-2016 - Ms. Archana Wadhwa, Member (Judicial) and Shri B, Ravichandran, Member (Technical) Ms. Reena Khair, Advocate and Ms. Aastha Gupta, C.A. - for the appellant. Shri Sanjay Jain, Authorized Representative (DR) for the Respondent. ORDER The appeal is against order dated 27/2/2012 passed by .....

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cted to do the work, entered into agreements with RSIC for various services as stipulated therein, The Department entertained a view that the appellants have rendered "business auxiliary services" (BAS) to various importers and exporters on behalf of RSIC at the ICDs. Proceedings were initiated against the appellant by issuing a show cause cum demand notice dated 18/10/2010 to demand and recover service tax of ₹ 8,04,80,401/- for the period from 01/4/2005 to 31/3/2009. The case w .....

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st and revenue sharing basis. They are working on principal to principal basis and they are not providing service to RSIC. Both the parties put together their resources and undertake various activities to generate revenue which is shared between them on pre-determined ratios. In this type of arrangement, there is no tax liability. Reliance was placed on decision of Hon'ble Kerala High Court in CCE vs. Cochin International Airport Limited reported in 2011 (24) S.T.R. 20 (Ker.), Hon'ble Ch .....

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CST, Delhi reported in 2013 (31) S.T.R. 155 (Tri. - Del.). Reliance was also placed on Board Circular dated 23/2/2009 to contest the service tax liability ; (b) RSIC have discharged service tax on the gross amount collected from the importers and exporters. A portion of this amount is now being sought to be taxed again at the hands of the appellant. This is not legally sustainable as the said amount suffered service tax fully ; (c) the demand is hit by limitation. The show cause notice dated 13 .....

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no malafide on the part of appellant. When the service tax has been discharged by RSIC on the full gross value, the appellant entertained the bonafide belief that no further service tax is liable to be paid on the said amount in a revenue sharing arrangement. They were guided by the Board's clarification dated 23/2/2009 and as such there is no justifiable reason for invoking extended period of demand against the appellant. (d) As an alternative it was submitted that even in case the appella .....

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of appeal and submitted mainly on the following grounds:- (a) the terms of contract clearly established that the appellants rendered services in relation to import and export operations including all other incidental operation/ services as mentioned in Schedule 3 of the agreement. Agreement clearly states that the contractor has to render services as stipulated. There is no element of doubt regarding the arrangement between the appellant and RSIC which is clearly one of service provider and serv .....

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ethodology of payment of consideration by RSIC to the appellants. This by itself does not determine the tax liability of the appellant. When the agreement is clear regarding rendering of service by the appellants the mode of receipt of consideration will not alter the tax liability. The Board's further clarification dated 13/12/2011 regarding revenue sharing arrangement has been correctly relied upon by the Original authority ; (d) the appellants were not registered with the Department and h .....

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ion 73. A careful perusal of one of the agreements dated 13/6/2007 w.r.t. ICD at Jodhpur reveals that the contractor (appellants) covenants with RSIC to render all services in relation to import and export operations including all other incidental operations/services mentioned in the annexed Schedule 3 and also undertakes to fulfill all its contractual obligations in time to the entire satisfaction of the corporation (RSIC). The agreement in various other places also repeatedly refers to the ser .....

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rt cargo. The nature of services rendered by the appellant is elaborately listed out in Schedule 3 of agreement. The appellants were also given the work of marketing activities of the ICD services including determination of prices to be charged from the users. They have also to ensure that ICD users make payment of services to RSIC at the rate determined by the appellant. The "business auxiliary services" as defined under Section 65 (19) of the Finance Act, 1994 reads as under :- Busin .....

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iliary to any activity specified in sub-clause (i) to (vi), such as billing issue or collection or recovery of cheques, payments maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation service, management supervision, and includes services as commission agent but does not include any activity that amount to manufacture of excisable goods, [Explanation - For the removal of doubts, it is hereby declared that for the .....

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ervices (iv) undertakes any activities relating to such sale or purchase or such goods or services ; (h) "excisable goods" has the meaning assigned to it in clause (d) of Section 2 of the Central Excise Act, 1944 (1 Of 1944) ; (i) "manufacture" has the meaning assigned to it in clause (f) of Section 2 of the Central Excise Act, 1944 (1 of 1944)]". 5. It is clear that the appellants were to market the ICD services, ensure the realization of amount from the users and provi .....

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ost/revenue sharing arrangement is not tenable in terms of clear wordings of the agreement and intention of the contracting parties as clearly manifested therein. The revenue sharing model which was discussed in Board's circular dated 23/2/2009 was w.r.t. movie distribution. In any case the said circular was further clarified vide Circular dated 13/12/2011 wherein it was mentioned that revenue sharing arrangement by itself does not preclude service tax liability. We find that the appellant a .....

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a taxable service rendered by the appellant. 6. The appellants contested the demand on the ground that the full value of consideration for taxable service as received by RSIC from various ICD users has suffered service tax and RSIC remitted the same to the Government. As such, it is the plea of the appellant that a portion of such consideration cannot be subjected to service tax again at the hands of the appellant. 7. We find that in terms of the agreement the appellants are rendering services l .....

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ceiving a portion of such gross consideration from RSIC and as such no further tax can be levied on them is not supported by any legal provision. As concluded earlier in this order, appellants are providing various services in terms of the agreement with RSIC and are getting consideration in terms of the same agreement. Admittedly the considerations received by appellants are for services. These are taxable services. RSIC paid service tax on the gross income and out of that income they have paid .....

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the agreement. While it is an admitted fact that the appellant service forms part of the overall service rendered by RSIC to various ICD users, payment of service tax by RSIC by itself will not exclude the tax liability of appellants, Apparently the tax liability on the appellant confirmed in the present proceedings is only w.r.t. the consideration received by them and not on the gross value received by RSIC. There is no double taxation in the present case. 8. The appellants relied on various de .....

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ire collection M/s Air India paid applicable service tax to the Government. In such situation the Tribunal arrived at the decision. In the present case the service tax liability is from the appellant for providing services to various exporters and importers on behalf of RSIC and getting certain consideration from RSIC for such services. The tax liability of the main party (RSIC) is not point of dispute in the present case and as such the issue involved is different from what is decided by the Ho .....

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mining the Circular issued by the Board prior to 2007 to decide on the service tax liability of sub-contractors. We find that the Board issued a consolidated master Circular on 23/8/07 which categorically brought out the legal position regarding sub-contractor's service tax liability. It is held that service tax is leviable on any taxable service provided whether or not the services are provided by a person in his capacity as a sub-contractor and whether or not such services are used as inpu .....

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al in a later case reported in 2014 (36) S.T.R. 408 (Tri. - Mum.) upheld the service tax liability of sub-contractor. We also take note that the Hon'ble Kerala High Court in Furnace Febrica India Ltd. reported in 2016 (43) S.T.R. 175 (Ker.) held in view of the specific clarification regarding input service it cannot be held that the sub-contractor is not liable to pay service tax for services provided by him. 11. Considering the above discussion and analysis the service tax liability on the .....

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re is no intend to evade payment of duty in such situation. The appellants relied on various case laws to reiterate their views. We find that the appellant is having a strong ground regarding the question of time bar. It is to be noted that all invoices, for full consideration, have been raised by RSIC and the amount collected from the clients [importers and exports] were subjected to service tax which was deposited to the Government. RSIC in turn are paying certain amount to the appellants to g .....

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n impression that when the main service provider discharged the service tax on gross value there may not be tax liability on the sub-contractor rendering similar service to the main contractor. The Tribunal in various cases held in such a case involving interpretation of law and also a bonafide belief regarding service tax liability, will not attract the demand for extended period. We also take note that service tax liability on the appellant when discharged will be available as a credit to RSIC .....

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