2025 (10) TMI 614 - AT - Service Tax

Matrimonial service held composite; OIDAR classification before July 2012 set aside; Section 73(2A) limits extended-period demands

M/s. KM Wedding Events Management Private Limited Versus Commissioner of GST and Central Excise Chennai

CESTAT, Chennai held that the matrimonial service is a composite/bundled service and its components cannot be vivisected; classification as OIDAR prior to ... Classification of services - matrimonial services - whether the matrimonial services which are undisputedly composite services, could be identified as OIDAR services prior to July 2012 or the OIDAR component alone could be vivisected and taxed prior to July 2012? - Invocation of extended period of limitation - HELD THAT:- It is the settled position of law that vivisection of composite services and taxing individual component thereof is impermissible under service tax. In fact, this bench had an occasion to deal with a similar situation in the case of M/s. Core minerals Vs. Commissioner of GST, Central Excise, Chennai [2024 (12) TMI 1196 - CESTAT CHENNAI] where it was held that 'the contract entered into in 2002 by the appellant with the mine owners for raising of ore is a composite mining contract and the alleged activity of 'site formation' is only incidental to the of mining service and hence, the scope of mining contract cannot be vivisected to demand service tax on the incidental activity of site formation.' It is not in dispute that the matrimonial services provided by the appellant is a composite service comprising of three services namely OIDAR, print media and match making advisory services. Applying the above ratio to the issue on hand, the legal position is that an individual component of a composite/indivisible service cannot be vivisected and taxed, which leaves the only question as to whether which of the three services in the above composite service namely OIDAR, print media and match making services, would render the essential character to the composite service on hand? - The department is right in classifying the above composite service as ‘matrimonial’ service considering the same as a ‘bundled service’ as per Section 66F of the Act post negative list regime. In fact, even the appellant does not have any grouse about the same - there are force in the argument advanced by the Ld. Counsel that even under pre-negative list regime, the said services rendered by the appellants would be in the nature of composite services/bundled services only and hence, the same has to be classified as per the prescription under Section 65 A(2)(b) of the Act. Both under pre-negative as well as post-negative regimes, the provisions relating to the classification of composite services are akin to each other. Thus, there are no hesitation in holding, in the present set of facts, that the provision of composite services namely matrimonial services which comprises of OIDAR, print media & match making services could only be classified as ‘matrimonial’ services both under prenegative as well as post-negative regimes by virtue of Section 65A(2)(b) read with Section 66F of the Act respectively, for the reason that such matrimonial services would render the most essential character of the composite/bundled services provided by the appellants. In view of the above, the classification under OIDAR service prior to July 2012 is held incorrect and accordingly, any demand based on the same merits to be set aside. Invocation of extended period of limitation - HELD THAT:- The appellants have placed on record two letters addressed to the department dated 11-01-2013 and 22-01-2013 duly acknowledged, which are part of the RUDs in the SCN wherein, the appellants appear to have communicated about the service tax payment and also the balances thereof. Moreover, as could be seen from the records, the date of visit of the investigation agency is 23-01-2013, which is subsequent to the letter given by the appellant. Further, the entire proceedings have not brought out any material suppression other than those communicated in the above letters submitted by the appellants. Rather, the entire quantification of the demand is solely based on the returns and the balance sheet of the appellants which could very well be seen from the RUDs to the SCN - there is no suppression of facts in the instant case, which warrants invocation of extended period of limitation - the belated filing of ST-3 return could at the most attract penalty, but the same can never be a ground for invocation of larger period and, that too, when the belated payment is compensated by appropriate interest. Hence, there are no justifiable ground being made out by the Revenue for invoking the proviso to Section 73(1) of the Act in the instant case and the consequential demand of duty for the larger period. Section 73(2A) of the Act cannot be applied retrospectively, in the instant case the Show Cause Notices have been given on 13-06-2014, a date subsequent to the insertion of Section 73(2A) in the Finance Act. So, therefore, on the date of issue of the Show Cause Notice, the said Section was available in the statute and, hence, the same has been rightly pressed into service. Thus in respect of O-in-O No. 28&29/2017 dated 06.03.2017 though the larger period of limitation would fail to survive, the demand pertaining to the normal period is enforceable in view of Section 73(2A) of the Act. The impugned Orders-in-Original sought for adjusting an amount of Rs.84,71,684/- towards the tax (Rs.37,54,109/- in respect of O-in-O No. 28&29/2017 dated 06.03.2017 and Rs.47,17,575/- in respect of O-in-O No. 46/2021 dated 30.11.2021), as well as an amount of Rs.5,39,597/- towards interest. The demand confirmed herein for the normal period as above, along with appropriate interest shall be adjusted against the above payments. Further, it is held that there is no ground for invocation of larger period in the instant case, all the associated penalties stand vacated. Appeal allowed in part. ISSUES PRESENTED AND CONSIDERED 1. Whether a composite/bundled matrimonial service comprising OIDAR, print-media advertisement and match-making consultancy can be vivisected and the OIDAR component taxed for the pre-negative list period (pre-01.07.2012) when no specific taxing entry for 'matrimonial' services existed. 2. Whether classification of the composite service as 'matrimonial service' both in the pre-negative list and post-negative list regimes is appropriate under Section 65A(2)(b) (pre-negative) and Section 66F (post-negative), and which element gives the composite its essential character. 3. Whether the proviso to Section 73(1) (extended/longer period of limitation for suppression/fraud) was rightly invoked by Revenue for demands spanning the disputed periods, including for periodical/ subsequent notices, and whether belated filing of ST-3 returns justifies invocation of the extended period. 4. Whether demands raised beyond the 5-year normal limitation were correctly computed with reference to the 'relevant date' under Section 73(6)(i)(a)/(b) where returns were filed belatedly. 5. Consequential: Whether penalties connected to demands based on extended period are sustainable if extended period invocation fails; and whether credit reversal rules (Rule 6 CCR) apply to overseas TV production transactions (treated as outside taxable territory). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Vivisection of composite matrimonial service pre-negative list Legal framework: Pre-negative regime classification governed by Section 65A(1)-(2); composite services to be classified by the service giving them their essential character per Section 65A(2)(b). Post-negative list principles in Section 66F govern bundled services interpretation after 01.07.2012. Precedent treatment: Tribunal and Supreme Court authorities cited (e.g., decisions on vivisection and composite contracts) establish that a composite/indivisible contract cannot be artificially split to tax an incidental component (principles in Daelim/BSNL/Quick Heal jurisprudence applied by reference). Interpretation and reasoning: The Court examined the contractual and operational reality - advertised packages bundled print publication, web access and personalised match-making/consultancy. Both OIDAR and print media are carriers; match-making is the core service. Applying Section 65A(2)(b), the essential character is matrimonial/match-making service. Vivisection to tax only the OIDAR element for pre-July-2012 period was therefore impermissible. Ratio vs. Obiter: Ratio - composite matrimonial service cannot be vivisected and re-classified as OIDAR in pre-negative list period; it must be classified by its essential character. Obiter - comparisons to mining/site formation jurisprudence and contractual construction principles are explanatory but support the ratio. Conclusion: Demand based on treating the composite service as OIDAR for the period before 01.07.2012 is incorrect and set aside insofar as it relies on such vivisection. Issue 2 - Classification as 'matrimonial service' under pre- and post-negative regimes Legal framework: Section 65A(2)(b) (pre-negative) and Section 66F(2)-(3) (post-negative) provide hierarchical rules: most specific description preferred; composite/bundled services take the essential character where elements are naturally bundled. Precedent treatment: Tribunal decisions and High Court authority referenced for bundled-service treatment; the bench relied on established principles preferring the most specific/main service where elements are naturally bundled. Interpretation and reasoning: The packages as offered are naturally bundled in the ordinary course of business; matrimonial service is the main objective and the other elements (print, OIDAR, horoscope matching, events) are ancillary/incidental. Both pre- and post-negative frameworks lead to classification as matrimonial service by essential character. Ratio vs. Obiter: Ratio - the composite services in issue are properly classifiable as matrimonial services under both Section 65A(2)(b) and Section 66F(3)(a). Obiter - discussion of carriers versus core service aids reasoning. Conclusion: Classification as matrimonial service is correct; demands premised on OIDAR classification for earlier years are unsustainable. Issue 3 - Invocation of extended/longer period of limitation (proviso to Section 73(1)) Legal framework: Proviso to Section 73(1) permits extended limitation where suppression of facts, collusion, wilful mis-statement or fraud is established. Section 73(2A) and subsequent amendments affect computation of demands and relevant dates; Section 73(6)(i)(a)/(b) deals with 'relevant date' for limitation where returns are filed or not. Precedent treatment: Revenue relied on cases affirming extended period when suppression or active concealment exists; Tribunal decisions on relevant date computation (Right Resource Management; Clean Care Services) applied for relevant date where returns were belated. Interpretation and reasoning: The appellant produced contemporaneous acknowledged letters (11-01-2013; 22-01-2013) disclosing services and tax balances; the investigative visit dated 23-01-2013 post-dates that disclosure. Quantification relied on returns and balance sheets available to Revenue. No material evidence of suppression, fraud, wilful mis-statement or collusion was demonstrated by Revenue. Belated filing of ST-3 returns, though improper, does not by itself constitute suppression justifying the draconian extended period; at best it attracts penalty but not automatic extension of limitation where disclosure and records existed. For the periodical/ subsequent SCN, similar facts and prior disclosure negated the suppression rationale for extension. Ratio vs. Obiter: Ratio - extended period invocation requires clear proof of suppression/fraud/collusion; belated ST-3 filing alone, especially where disclosures/acknowledgements exist, is insufficient. Obiter - reliance on distinguishing facts in Revenue's cited authorities where non-furnishing of information was critical. Conclusion: Proviso to Section 73(1) was not rightly invoked for the majority of demands; extended period findings vacated. Exception: Section 73(2A) applicability at date of SCN allowed survival of demands for the normal limitation period for certain months (see Issue 4 conclusion). Issue 4 - Computation of relevant date and survival of certain demands within 5-year normal limitation Legal framework: Section 73(6) defines 'relevant date' depending on whether return is filed or not; Tribunal precedent holds that if return is filed belatedly, the last date on which return ought to have been filed may be the relevant date for limitation computation (Right Resource Management; Clean Care Services reasoning applied). Precedent treatment: Tribunal decisions holding that for belated returns the 'relevant date' may be the due date for filing (thus restricting scope of later SCNs) were followed. Interpretation and reasoning: Although extended period invocations largely failed, the Court recognized that certain demand elements falling within the normal limitation period as computable under Section 73(2A)/(6) survive. Section 73(2A) (inserted before issuance of SCN) applied on date of SCN issuance; accordingly, demand for July 2012-March 2013 survived as within normal period. For later period SCN, computing relevant date per established Tribunal ratio constrained demands beyond five years; some portions of O-in-O 46/2021 were time-barred except for a small newly conceded/service element (mandap keeper) which legitimately survived. Ratio vs. Obiter: Ratio - normal limitation period must be calculated from the correct 'relevant date'; belated filing does not automatically extend the period and may limit Revenue's claim to amounts within the relevant date window. Obiter - the Court's application of specific computation to facts is fact-sensitive. Conclusion: Certain demands for the normal period (notably July 2012-March 2013) survive and are confirmed (aggregate confirmed demand quantified by the Tribunal), while demands beyond the relevant dates are time-barred and set aside. Issue 5 - Penalties, interest adjustment and CENVAT Rule 6 issue for overseas transactions Legal framework: Penalties tied to validity of demand (and extended period invocation); CENVAT Rule 6 requires reversal where exempted services are provided, but jurisprudence allows reversal of corresponding input credit rather than imposing tax where activity is outside taxable territory. Precedent treatment: Decisions cited indicate that where extended period cannot be invoked, associated penalties cannot be sustained; Tiara Advertising and other authorities support credit reversal approach for exempt/foreign transactions. Interpretation and reasoning: Because extended period invocation is invalidated, associated penalties vacated. Interest remains payable where confirmed demands survive; earlier tax payments/adjustments on record are to be applied against surviving demand. The Court declined detailed resolution of Rule 6 (overseas TV rights) because limitation disposition rendered those issues moot for present demands. Ratio vs. Obiter: Ratio - penalties dependent on invalid extended demands are vacated; confirmed normal-period demands attract interest and may be adjusted against earlier payments. Obiter - remarks on Rule 6 and overseas transactions reserved as unnecessary given limitation outcome. Conclusion: Penalties vacated; confirmed demand for the normal period and the small conceded mandap-keeper amount are upheld and to be adjusted against earlier payments; interest payable on surviving demand. Issues on CENVAT Rule 6 left unaddressed as unnecessary for disposal.