TMI Blog2023 (7) TMI 1386X X X X Extracts X X X X X X X X Extracts X X X X ..... to sub-section (1) of section 67 defines consideration to include any amount that is payable for the taxable services provided or to be provided, or any reimbursable expenditure, or any amount retained by the lottery distributor or selling agent. The contention of the Corporation is that the amount collected by the Corporation for the reason that the conditions stipulated in the agreement had not been complied with by the liquor manufacturers are not consideration in view of any service and, therefore, cannot be held to be taxable under section 66E(e) of the Finance Act 1994 in view of the Larger Bench decision of the Tribunal in Commissioner of Service Tax, Chennai vs. Repco Home Finance Ltd. [ 2020 (7) TMI 472 - CESTAT CHENNAI] and the Division Bench decision of the Tribunal in South Eastern Coalfileds vs. Commissioner of Central Excise and Service Tax [ 2020 (12) TMI 912 - CESTAT NEW DELHI] . In Repco Home Finance, the Larger Bench of the Tribunal held that the consideration must flow from the service recipient to the service provider for a taxable service provided under the Finance Act. The service recipient may have to fulfil certain conditions of the contract but that would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporation to ensure quality of liquor and effective controlled distribution. For this purpose, all the liquor manufacturers/ re-sellers have to sell their products only to the Corporation as per the excise laws of the State and all the retail licensees can purchase liquor only from Corporation. Thus receipt, storage and dispatches of liquor can only be done by Corporation. To ensure optimum utilisation of space and resources, the Corporation gives advance planning of purchase and sale of liquor and the manufacturers have to abide by that. In case of failure, conditions are imposed under the Agreement and the consequence have to be borne by the liquor manufacturers. These conditions with the consequences are as follows: (i) Late Inward Charges: The fines are chargeable from the manufacturers to discourage them to effect delayed supplies; (ii) Order for Supply Extension/Cancellation Fee: Corporation issues the order for supply, which has to be adhered to. If a liquor manufacturer perceives that it will not be able to fulfil the order for supply in due time, it approaches the Corporation to extend/cancel the same against payment of this fee; (iii) Transfer Out Order Fees: The Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppliers of the liquorare examined in the light of the applicable statutory provisions i.e. Section 65(19) read with 65(105) (zzb) ibid, the only conclusion which is coming out is that the activities of the RSBCL in relation to liquor stored by the manufacturer/supplier of the liquor in their Godown constitute provision of Business auxiliary service (hereinafter 'BAS'), since they provide a service in relation to the sale of goods produced by the manufacturer/supplier of the liquor. Further, it appears that any argument that they were engaged in trading of the liquor is not tenable being contrary to the stipulations made in LSPs as well as agreement entered with the manufacturer/supplier of the liquor as on analysis of the several clauses of the agreement (referred to above), it appears that the RSBCL was never the owner of the liquor nor had title in the liquor supplied to it. It appears that they were just acting as the consignee of the goods belonging to the manufacture/supplier. Therefore, it appears that within the framework of the agreements, considered in the context of the taxable BAS, as defined in Sections 65(19) read with 65(105) (zzb) of the Act ibid, there appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sale of goods only and no services were provided. The department filed a Special Leave Petition before the Supreme Court which was dismissed. The review petition filed before the Rajasthan High Court was also dismissed. 9. It also transpires that for the period 01.09.2007 to 31.03.2011, a demand for service tax was created by a show cause notice dated 11.10.2012 but the Tribunal, relying on the Rajasthan High Court judgment, decided the issue in favour of the Corporation and the order confirming the demand of service tax was set aside. 10. It would, therefore, transpire that prior to the issue of the two show cause notices dated 18.11.2016 and 05.04.2018 which are the subject matter of in the present appeals, the issue as to whether the Corporation was liable to pay service tax for sale of liquor of liquor manufacturers under BAS had been settled by the Rajasthan High Court holding that the Corporation was involved in sale of goods only and no services were provided for the period prior to 01.07.2012. 11. The appellant filed a detailed reply to the two show cause notices dated 18.11.2016 and 05.04.2018 pointing out that it was not liable to pay in service tax. The Principal Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (excluding interest received from suppliers and Income from Hologram Charges) Total Taxable value ST payable (inclusive of cesses) (1) (2) (3) (4) (5) (6) 2011-12 38680642 3672889 42353531 4362414 In case of SCN-1 2012-13 42851635 7903511 50755146 6273336 2013-14 39587347 11380498 50967845 6299626 2014-15 68388935 21705916 90094851 11135724 Total-A 189508559 44662814 234171373 28071100 2015-16 75092000 18822000 93914000 13617530 In case of SCN-2 2016-17 75760000 37710000 113470000 17020500 2017-18 (up to 6/2017) 12427987 11654326 24082313 3612347 Total-B 163279987 68186326 231466313 34250377 Total- A+B 352788546 112849140 465637686 62321477 39.1 Summing up, I hold that the assessee is liable to Service Tax amounting to Rs. 6,23,21,477/- (inclusive of all Cesses)on the amounts other than the commission collected and they are also liable to pay due interest thereupon in terms of Section 75 of the Act. Out of the total demand under SCN-1 and SCN-2 of Rs. 37,65,33,893/- (Rs. 20,53,16,530/- + Rs. 17,12,17,363/-), the balance amount of Demand of Rs. 31,42,12,416/- is held unsustainable and is, therefore, liable to be dropped. (emphasis supplied) 12. The aforesaid position in regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed. Explanation . For the purposes of this section, (a) consideration includes (i) any amount that is payable for the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. 2020 (42) G.S.T.L. 104 (Tri.-LB), and the Division Bench decision of the Tribunal in South Eastern Coalfileds vs. Commissioner of Central Excise and Service Tax. 17. The Corporation also places reliance upon the Circular 28.02.2023 issued by Central Board of Indirect Tax Customs regarding leviability of service tax under section 66E(e) of the Finance Act. 18. In Repco Home Finance, the Larger Bench of the Tribunal held that the consideration must flow from the service recipient to the service provider for a taxable service provided under the Finance Act. The service recipient may have to fulfil certain conditions of the contract but that would not necessarily mean that it would form part of the value of the taxable service. The relevant paragraphs of the decision are reproduced below: 27. What follows from the aforesaid decisions is that consideration must flow from the service recipient to the service provider and should accrue to the benefit of the service provider and that the amount charged has necessarily to be a consideration for the taxable service provided under the Act. It should also be remembered that there is marked distinction between conditions to a contract and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the intention of the appellant to impose any penalty upon the other party nor is it the intention of the other party to get penalized. 28. It also needs to be noted that section 65B(44) defines -service to mean any activity carried out by a person for another for consideration. Explanation (a) to section 67 provides that-consideration includes any amount that is payable for the taxable services provided or to be provided. The recovery of liquidated damages/penalty from other party cannot be said to be towards any service per se, since neither the appellant is carrying on any activity to receive compensation nor can there be any intention of the other party to breach or violate the contract and suffer a loss. The purpose of imposing compensation or penalty is to ensure that the defaulting act is not undertaken or repeated and the same cannot be said to be towards toleration of the defaulting party. The expectation of the appellant is that the other party complies with the terms of the contract and a penalty is imposed only if there is non-compliance. 29. The situation would have been different if the party purchasing coal had an option to purchase coal from A or from B and if in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board has decided not to file appeal against the CESTAT order ST/A/50879/2022-CU[DB] dated 20.09.2022 in this case and also against Order A/85713/2022 dated 12.8.2022 in case of M/s Western Coalfields Ltd. Further, Board has decided not to pursue the Civil Appeals filed before the Apex Court in M/s South Eastern Coalfields Ltd. supra (CA No. 2372/2021), M/s Paradip Port Trust (Dy. No. 24419/2022 dated 08-08-2022), and M/s Neyveli Lignite Corporation Ltd (CA No. 0051-0053/2022) on this ground. 6. In view of above, it is clarified that the activities contemplated under section 66E(e), i.e. when one party agrees to refrain from an act, or to tolerate an act or a situation, or to do an act, are the activities where the agreement specifically refers to such an activity and there is a flow of consideration for this activity. Field formations are advised that while taxability in each case shall depend on facts of the case, the guidelines discussed above and jurisprudence that has evolved over time, may be followed in determining whether service tax on an activity or transaction needs to be levied treating it as service by way of agreeing to the obligation to refrain from an act, or to to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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