2023 (7) TMI 57 - AT - Service Tax

Tribunal Overturns Order: Service Tax Demands on Meetings, Electricity Charges, and Employment Scheme Deemed Unsustainable.

The Tribunal set aside the impugned order, allowing the appeal. It found the service tax demands on convention services, annual general meetings, balance ... Classification of services - convention service or not - service to various firms/companies engaged in the manufacturing activities or providing services on payment of duty/taxes - period 18.04.2006 to 15.05.2008 - HELD THAT:- On examination of definition and scope of convention and convention service provided in the Finance Act, 1994, it is clear that the convention service is taxable only when it is provided to some person in relation to holding of a convention - Wherein in the present case, it is found that the appellant do not provide any service to any person in relation to the holding of a convention. Further the scope of convention service has been clarified by CBEC vide letter F.No.B.11/1/2001-TRU dated 09.07.2001 Government of India, Ministry of Finance, Department of Revenue. The issue has further been clarified vide CBEC Circular No. 51/13/2002 dated 07.01.2003. During the relevant period, the appellant cannot be termed to be a commercial concern so as to make them liable to pay service tax for providing a necessary infrastructure for conduct of the conventions. By no stretch of imagination, the appellant can be termed as a commercial concern as they are a body of the industry formed as a trust to protect the interest of industry. Therefore, notwithstanding the fact that they are collecting certain sums for providing the infrastructure for holding conventions, they cannot be termed as a commercial concern to be liable to pay service tax for this activity - Once the convention is open to general public, then it is not a convention within the meaning of ‘Convention’ under service tax law and consequently no demand of service tax can be raised on convention service. Levy of Service Tax - convention service - annual general meeting - HELD THAT:- This demand is not sustainable as the annual general meeting is organized for the members themselves as it is a members organization and the members meet in annual general meeting to discuss various issues relating to the organization and accounts etc. However, this meeting is not open to general public. This activity is squarely covered by the principle of mutuality as approved by the Hon’ble Apex Court in the case of STATE OF WEST BENGAL & ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE & ORS. VERSUS M/S. RANCHI CLUB LTD. [2019 (10) TMI 160 - SUPREME COURT]. Demand of service tax - differential amount under convention service - HELD THAT:- This demand is also not sustainable as the figures in the balance sheet reflects the income and expenditure of the organization and has nothing to do with the liability or payment of service tax. Service tax is paid on specific heading, based on invoices and not on the gross amount. The demand of department is solely based on the gross figures available without any supporting evidence and hence is vague and liable to be dropped. Demand of service tax - reimbursement of electricity consumption related to business exhibition service - HELD THAT:- The appellant provides business exhibition service and admittedly appropriate amount of service tax is paid on that activity. The appellant also charges reimbursement of electricity charges from the exhibitor which is sought to be taxed by the department. In this regard, it is to be noted that the demand of service tax on reimbursement of expenses has been held ultra virus by the Hon’ble High Court of Delhi in the case of INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. VERSUS UOI. & ANR. [2012 (12) TMI 150 - DELHI HIGH COURT] - the demand of service tax on reimbursement of electricity charges are set-aside as there is no nexus between electricity reimbursement and service provided. Levy of service tax - Modular Employment Scheme - Business Auxiliary Service - period 2009-10 & 2010-2011 - HELD THAT:- The modular employment scheme is a vocational training programme, administered by Ministry of Labour, Government of India. The appellant is approved assessing body of the programme and as per the mandate of the Government, the appellant examine and assess the students enrolled in the scheme - It is observed that the activity is integral part of vocational training and vocational training activity is outside the ambit of service tax. The assessing activity done by the appellant is part of the vocational training activity exempted vide Notification No. 24/2004-ST dated 10.09.2004 and later exempted from service tax vide Notification No. 23/2010-ST dated 29.04.2010 - the show cause notices in this regard clearly failed to provide under which category service tax is demanded on receipt under Modular Employment Scheme. In the absence of any specific category, the demand of service tax is vague and liable to be dropped. Extended period of Limitation - HELD THAT:- In the present case, the appellant-assessee has acted on bonafide belief that they are not liable to pay service tax and the department was aware of the working of the assessee and the appellant-assessee has been paying service tax wherever they are liable to pay. Further, the entire demand has been raised on the basis of figures declared by the appellant in invoices, balance sheet duly audited and submitted to various authorities and therefore in such situation extended period of limitation is not invokable - extended period of limitation has been invoked without any justified reason because the allegation made in the show cause notice does not specifically mentions as to what fact the assessee was to inform, which was suppressed - the substantial demand of service tax is barred by limitation. Levy of Penalty - HELD THAT:- Once it is held that the service tax itself is not leviable, the question of imposing penalty does not arise. The impugned order is not sustainable in law and is liable to be set-aside - Appeal allowed. Issues Involved:1. Demand of Service Tax on Convention Services2. Demand of Service Tax on Annual General Meetings3. Demand of Service Tax Based on Balance Sheet Differences4. Demand of Service Tax on Reimbursement of Electricity Charges5. Demand of Service Tax on Modular Employment Scheme6. Validity of Show Cause Notice7. Invocation of Extended Period of Limitation8. Imposition of PenaltySummary:1. Demand of Service Tax on Convention Services:The Tribunal examined the definition of 'Convention' and 'Convention Service' under Section 65 of the Finance Act, 1994. The appellant argued that they did not provide services to any person 'in relation to holding a convention' and that their conventions were open to the general public. The Tribunal agreed, stating that the appellant could not be termed a commercial concern liable for service tax on convention services. The conventions were open to the general public, thus not falling under the taxable category.2. Demand of Service Tax on Annual General Meetings:The demand for service tax on annual general meetings was found unsustainable. The Tribunal noted that these meetings were for members only and not open to the general public, thus falling under the principle of mutuality as approved by the Supreme Court in the case of State of West Bengal vs. Calcutta Club Ltd.3. Demand of Service Tax Based on Balance Sheet Differences:The Tribunal found the demand based on balance sheet differences to be unsustainable. It was noted that service tax is paid on specific headings based on invoices, not on gross amounts reflected in balance sheets. The demand was deemed vague and unsupported by evidence.4. Demand of Service Tax on Reimbursement of Electricity Charges:The Tribunal set aside the demand for service tax on reimbursement of electricity charges, referring to the Delhi High Court's judgment in Inter-Continental vs. UOI, which held that such reimbursements are not taxable.5. Demand of Service Tax on Modular Employment Scheme:The Tribunal found the demand for service tax on the Modular Employment Scheme under 'Business Auxiliary Service' to be unsustainable. The scheme was part of a vocational training program exempted from service tax. Additionally, the show cause notice failed to specify the category under which the tax was demanded, rendering the demand vague.6. Validity of Show Cause Notice:The Tribunal held that the show cause notice was vague and lacked specific allegations, making it impossible for the appellant to respond adequately. This was supported by the Supreme Court's observations in CCE vs. Brindavan Beverages (P) Ltd. and other cases.7. Invocation of Extended Period of Limitation:The Tribunal found that the extended period of limitation was invoked without justified reason. The appellant had acted on a bona fide belief and the department was aware of their activities. The demand was based on declared figures in audited balance sheets, and thus, the extended period was not applicable.8. Imposition of Penalty:Since the service tax itself was found not leviable, the Tribunal held that the imposition of penalties was not warranted.Conclusion:The impugned order was found unsustainable in law and was set aside. The appeal was allowed.