Service tax demands fail on joint venture receipts and account reconciliation, though reverse charge applies to foreign bank letter of credit charges.

Unparticularised reconciliation of commercial accounts could not sustain a service tax demand where the levy period required a different basis of taxation and no proper bifurcation of alleged short payment was shown; the demand was set aside. Receipts under the airport metro concession were treated as arising from a joint venture with community of interest, joint control and shared revenue, so they were not taxable as renting of immovable property service; the demand was set aside. Letter of credit charges paid to foreign banks were held taxable under reverse charge in principle, but the extended period and penalties were not sustained; only limited tax liability survived.

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Issues: (i) whether the demand arising from alleged wrong utilisation of Cenvat credit on consulting engineering services was sustainable; (ii) whether the demand based on reconciliation of commercial accounts with service tax returns could be upheld; (iii) whether receipts from the airport metro concession arrangement were taxable as renting of immovable property service; and (iv) whether letter of credit charges paid to foreign banks were taxable under reverse charge, and whether penalties could survive.

Issue (i): Whether the demand arising from alleged wrong utilisation of Cenvat credit on consulting engineering services was sustainable.

Analysis: The disputed credit issue had already been decided in the assessee's favour in the connected appeal. The same issue, arising on identical facts and period, was treated as covered and the demand was not sustained.

Conclusion: The issue was decided in favour of the assessee and the demand was set aside.

Issue (ii): Whether the demand based on reconciliation of commercial accounts with service tax returns could be upheld.

Analysis: The accounts were maintained on mercantile basis, while service tax for the relevant part of the period was payable on receipt basis, and later only in accordance with the amended regime. The opening debtor balance included taxable and non-taxable amounts as well as brought forward sums, and no proper bifurcation of the alleged short payment was shown. The reconciliation adopted in the adjudication was therefore found unsustainable.

Conclusion: The issue was decided in favour of the assessee and the demand was set aside.

Issue (iii): Whether receipts from the airport metro concession arrangement were taxable as renting of immovable property service.

Analysis: The concession arrangement was found to have the features of a joint venture, including community of interest, joint control, shared revenue, and mutual participation in establishing and running the metro line. On that basis, the receipts were held to arise from a co-venture and not from a taxable landlord-tenant or service provider-service recipient relationship. The exemption under Notification No. 25/2012-ST was also held to be unavailable for the earlier period, but the demand still failed on the joint venture characterization.

Conclusion: The issue was decided in favour of the assessee and the demand was set aside.

Issue (iv): Whether letter of credit charges paid to foreign banks were taxable under reverse charge, and whether penalties could survive.

Analysis: The LC charges were held to be taxable in principle under reverse charge because they were connected with banking and financial services in the loan arrangement. However, the assessee was entitled to Cenvat credit and the extended period was not sustained on this demand. The penalties were also removed because the disputes were treated as interpretational.

Conclusion: The issue was decided partly against the assessee on taxability, but the extended period and penalties were not sustained.

Final Conclusion: The assessee succeeded on the major demands, while a limited tax liability under reverse charge survived; the revenue's appeal succeeded only to that limited extent and all penalties were set aside.

Ratio Decidendi: A demand of service tax cannot rest on an unparticularised reconciliation of accounts where the tax regime requires a different basis of levy for the relevant period, and a concession arrangement structured as a joint venture does not create a taxable service between co-venturers in the absence of a genuine service-provider relationship.

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