2014 (6) TMI 731 - AT - Service Tax

Appeals Allowed as Tribunal Dismisses Allegations of Business Support Services

KARAN AGENCIES Versus COMMISSIONER OF CENTRAL EXCISE, KOLHAPUR

The Tribunal held that the appellants did not provide business support services as defined under the Finance Act. The orders confirming the demands and ... Demand of service tax - Business Support Services - manufacture and sale of products of the distillery unit - Held that:- The definition of 'business support service' as reproduced above, covers only services of supporting nature for the main business i.e. manufacturing, trading and service like services related to marketing etc. Appellants had undertaken the activity of manufacture and sale of products of the distillery unit itself and profit and loss also is on account of the appellants and not given any support service to M/s. Kolhapur Sugar Mills Ltd. Further we find that on the same agreement, almost for the same period, the Revenue directed M/s. Kolhapur Sugar Mills Ltd. to pay service tax under the category of franchise service vide letter dated 23rd August 2006 and M/s. Kolhapur Sugar Mills Ltd. are paying service tax under the category of franchise service regularly and this fact is not in dispute. In these circumstances, we find that the appellants had not provided any service which can be termed as 'business support service' as provided under Section 65 (104c) of the Finance Act - Decided in favour of assessee. Issues:1. Confirmation of demands for business support service provided.2. Imposition of penalties by the adjudicating authority.3. Interpretation of the agreement between the parties.4. Application of the definition of 'business support service' under the Finance Act.5. Dispute regarding the nature of services provided by the appellants.6. Comparison with the Revenue's direction for service tax under a different category.7. Decision on the sustainability of the demands.Confirmation of Demands for Business Support Service Provided:The appellants appealed against the adjudication orders confirming demands of Rs. 4,39,66,593/- and Rs. 85,40,423/- with interest, asserting that they did not provide business support service. The adjudicating authority imposed penalties along with confirming the demands based on the agreements with M/s. The Kolhapur Sugar Mills Ltd. regarding the distillery and country liquor division management. The Revenue argued that the appellants supported the business operations of M/s. The Kolhapur Sugar Mills Ltd., leading to the demands being rightfully made.Imposition of Penalties:Penalties were imposed by the adjudicating authority in addition to confirming the demands. However, the appellants contended that they did not provide any business support service as defined under the Finance Act, challenging the sustainability of the penalties imposed.Interpretation of the Agreement Between the Parties:The agreement between the appellants and M/s. Kolhapur Sugar Mills Ltd. involved the appellants paying a specific amount for using the distillery unit's infrastructure for manufacturing products. The agreement outlined that all profits and losses from the manufacture and sale of products in the distillery division were the responsibility of the appellants, indicating a direct involvement in the business operations.Application of the Definition of 'Business Support Service' under the Finance Act:The definition of 'business support service' under the Finance Act was crucial in determining whether the appellants provided such services. The Act specified services related to business or commerce support, including various activities like customer relationship management, transaction processing, and infrastructural support services.Dispute Regarding the Nature of Services Provided by the Appellants:The appellants argued that they were engaged in the manufacture and sale of products from the distillery unit under the agreement, with profits and losses attributed to them. They maintained that they did not provide business support services to M/s. The Kolhapur Sugar Mills Ltd., as the Revenue alleged.Comparison with the Revenue's Direction for Service Tax Under a Different Category:A significant point of contention was the Revenue's direction to M/s. The Kolhapur Sugar Mills Ltd. to pay service tax under the franchise service category for the same agreement period. This raised doubts about the consistency and accuracy of the demands made on the appellants for business support services.Decision on the Sustainability of the Demands:After evaluating the agreement, activities undertaken, and the nature of services provided, the Tribunal concluded that the appellants did not offer business support services as defined under the Finance Act. The orders confirming the demands and penalties were set aside, and the appeals were allowed, highlighting the lack of evidence supporting the allegations of providing business support services.---