Service tax not applicable on deposit received for joint venture arrangement under Business Support Service category

CESTAT Chandigarh allowed the appeal regarding service tax levy on Business Support Service for a joint venture arrangement. The appellant entered into a MOU with another company for setting up a 20 MW CDM co-generation plant on BOOT basis. The department levied service tax on Rs. 50 lakh deposit received. CESTAT held that Business Support Service involves outsourced work with deployment of services and personnel, which was absent here. The relationship was principal-to-principal basis constituting a joint venture, not service provider-client arrangement. The deposit was not consideration for any service provision. The impugned order was set aside as legally unsustainable.

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Issues involved: Interpretation of service tax liability u/s Business Support Service for infrastructural support provided in a joint venture agreement.

Summary:
The case involved M/s Fazilka Co-Op Sugar Mills Ltd, engaged in a joint venture with M/s a2z Infrastructure Pvt. Ltd. for setting up a CDM Co-generation plant. The dispute arose when the Revenue claimed that the appellants provided infrastructural support service to M/s a2z falling under "Business Support Service" without paying the applicable service tax. The appellants argued that the agreement was in the nature of a joint venture and no service provider-recipient relationship existed. The Revenue contended that the advance received constituted consideration for infrastructure service provided by the appellants.

The tribunal analyzed the agreement and definitions of Business Support Service, emphasizing that the provision of office utilities, secretarial services, etc., constitutes infrastructural support services. However, it noted that no outsourcing of work was visible in the case, and the agreement was mutually beneficial. The advance paid by M/s a2z was specifically for the modernization of the sugar plant and not for any service rendered by the appellants. The tribunal concluded that the relationship was on a principal-to-principal basis akin to a joint venture, and the impugned order did not stand legal scrutiny, allowing the appeal.

In conclusion, the tribunal held that the deposit received by the appellants was not consideration for any service provided, and the agreement was not based on a service provider-client relationship but was mutually beneficial. The order was set aside, and the appeal was allowed.

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