TaxTMI 
TaxTMI 
TaxTMI 
2011 (6) TMI 129
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....ts from public under Sahara Swaran Yojana and Sahara Rajat Yojana Schemes. The Applicants through their network of more than 1500 branch offices all over India were rendering services to SICCL for mobilizing deposits/applications under the said schemes. This service did not involve any procurement of land or sale of real estate. The Applicant was entitled to a remuneration calculated as a percentage (11 per cent) of the total deposits mobilized under these deposit schemes. The said remuneration was also inclusive of the reimbursement at 8.5 per cent towards various expenses incurred by the Applicant. B. Land Procurement Charges The Applicant had entered into MOU/Agreement dated 1-4-2001 with SICCL for Land Procurement services. As per the MOU, the Applicant was required to collect information regarding availability of land after due verification, consolidation of land including change of land use, verification of title, registration of land, etc. In this case, the Applicant was entitled to a remuneration of Rs. 7 per square feet of actual area of land procured. C. Mobilizing applications for Sahara Debentures The Applicants were rendering services to Sahara Group companies in ....
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.... of service tax under 'business auxiliary service' on remuneration received by the Applicants towards mobilization of applications for debentures issued by other Sahara Group Companies. It is the case of the department that debentures constitute 'goods' and that the Applicants had promoted, marketed or sold the 'goods' (debentures) belonging to their clients (SICCL) and hence, covered by the definition of business auxiliary services. D. Personalized Services provided to Debenture holders 2.4 The O-I-O has confirmed demand of service tax under the category of 'business auxiliary service' on remuneration received by the Applicants for providing personalized services to the debenture holders in connection with transfer, redemption, early redemption, conversion, etc. of such debentures. Submissions of the Applicant A. Mobilizing deposits under Sahara Swarn and Rajat Yojna A. 1 The salient features of the deposit schemes may be enumerated as under: (i) The applicant/depositor deposits a specified sum, either in lump sum or in instalments, under the scheme. (ii) The deposit shall be for a specified period of time (usually ten years). (iii) The depos....
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....on on the total deposits mobilized by them irrespective of whether the depositor ultimately utilized the maturity amount for purchase of immovable property or en-casheed the same. Thus, the conclusion drawn in the impugned O-I-O that the services rendered by the Applicants were in relation to sale of immovable property is erroneous. Tax liability cannot be based on mere language used in the agreement A.7 Further, the ld. Commissioner has erred in merely relying on the language used in the Agreement dated 1-4-1996 between the Applicant and SICCL, without appreciating the true nature of services rendered. The taxability of the services will depend on the actual nature of services rendered and not merely on the language used in the agreement. In support of this proposition, reliance is placed on the judgment of the Hon'ble CESTAT in Jetlite (India) Ltd. v. CCE [2011] 30 STT 324 (New Delhi - CESTAT) A.8 In the present case, it is undisputed fact that the income in question was received by the Applicant as remuneration for only mobilizing deposits under Sahara Swaran/ Rajat Yojana deposit schemes. As already contended, mobilizing of such deposits cannot be said to be service in relat....
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....Industrial Security (P.) Ltd. v. CCE [2008] 14 STT 206 (Kol. - CESTAT), LA Freightlift (P.) Ltd. v. CST [Final Order No. 1011/2008, dated 18-9-2008] B.4 Since the land procurement charges were not received by the Applicant during the relevant period the ld. Commissioner has erred in confirming demand of service tax even on such amounts. It is submitted that the finding given by the ld. Commissioner that the Applicant had received such amounts is factually incorrect. B.5 In support of the contention that the Applicant did not receive payment towards land procurement charges during the relevant period (up to 31-3-2006), reliance is placed on the following: (i) Statement of Shri Ravindra Kumar Srivastava, Auditor of the Applicant and SICCL recorded on 27-8-2008 confirming the fact that Land Procurement Charges were not received by the Applicant from SICCL during the relevant period. (ii) Certificate issued by the Chartered Accountant (Auditors of the Applicant) confirming the fact that no payments towards Land Procurement Charges were received from SICCL during the period up to 31-3-2006. (iii) Certificate issued by the Chartered Accountant (Auditor....
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....hat these debentures/bonds were unsecured. The Applicants were entitled to receive remuneration as a percentage of the amount of debentures mobilized/collected by them for their group companies. C.2 It is the case of the department that debentures constitute 'goods' and that the Applicants had promoted, marketed or sold the 'goods' (debentures) belonging to their clients (SICCL) and hence, covered by the definition of business auxiliary services. C.3 It is submitted that Debentures/ Bonds are in the nature of actionable claims (debts) and hence, excluded from the definition of 'goods' under Sale of Goods Act, which is borrowed for the purposes of service tax. In this regard, reliance is placed on the judgment of the Supreme Court in the case of R.D. Goyal v. Reliance Industries Ltd. [2003] 1 SCC 8l, wherein the Apex court had categorically held that debentures are in the nature of actionable claims and hence, excluded from the definition of goods. It is pertinent to mention here that though the said case of R.D. Goyal (supra) (pertained to MRTP Act, the definition of goods was borrowed from the Sale of Goods Act, 1930 and hence, the judgment of the Apex Court is squarely applicab....
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....ided to Debenture holders D.1 As already argued, the basic pre-requisite for a transaction to be covered by business auxiliary service is that the client must be either selling goods or providing services and the service provider must provide services auxiliary to such sale of goods or provision of services. In the present case, the service receiver (SICCL) had issued debentures or bonds to various applicants and the Applicants were providing services in connection with transfer, redemption, etc. of such debentures or bonds to the debenture or bond holders. SICCL was not selling any goods or providing services to the debenture holders or bond holders. In fact, SICCL had borrowed money from the debenture holders or bond holders. Hence, the services provided by the Applicants to such debenture holders/bond holders would not get covered under business auxiliary services. E. Submissions on excludability of reimbursable expenses E.1 Without prejudice to the above contentions, it is submitted that the amount received by the Applicant towards reimbursement of expenses incurred on behalf of their group companies cannot be said to be forming part of the taxable value. Therefore, the dema....
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....rther submitted that the applicants have been charged for non-payment of service tax of Rs. 43.1 crore under business auxiliary service for activity in the capacity of arranger of fund of Rs. 163.17 crore under Real Estate Services for facilitation of amount procurement and marketing of real estate projects. He further submitted that the activities in relation to facilitation of marketing of optionally fully convertible debentures (OFCD) such as making application forms available for debentures, collection of money and maintenance of record etc. is covered under Business Auxiliary Services under clause (i) of section 65(19) of Finance Act, 1994 in relation to promotion/marketing or sale of goods. With regard to this, he submitted that debentures ; could be treated as goods as per definition of section 2 of the Securities Contracts Regulation Act, 1956 and section 2(12) of the Companies Act, 1956. He further submitted that in the case law relied by the applicants in the case of R.D. Goyal (supra), the issue was that whether public issue of debentures would amount to unfair trade or not? Hence that is not applicable to this case. He further submitted that OFCD are convertible debentu....
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.... to sale and purchase is exercised and Sahara Swarna and Rajat Yojna do not involve any sale or purchase of the real estate. They have not received charges for land procurement. It has been held by the Commissioner that Sahara India were required to render service for identification of client such as verification, consolidation, preliminary development and supervision, etc. of the real estate projects including conversion of bonds, debentures (Sahara Swarna and Sahara Rajat Yojna) for purchase of real estate products and received remuneration and consideration for the same and all these activities are covered under Real Estate Agent Service. Commissioner has relied upon the following Board Circulars and decisions of this Tribunal. a. Board's letter F.No. B-11-3-1998-TRU dated 7-10-1998 b. Indus Tubes Ltd. v. Commissioner 2007 (T)STR 238 (Trib. - Delhi) c. Prem Steels Pvt. Ltd. v. CCE Meerut (2009) 17-ST- J-474 (CESTAT-New Delhi)" 6. He further submitted that the applicant acted as an agent on behalf of SICCL and SIMS under MOU and agreement. They have acted as a real estate agent by rendering services and in relation to p....
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....m under Sahara Rajat Yojana as advance as per the terms and conditions of the Company." In the terms of condition of the application form, the clauses 7(a), 7(b) and 7(e) read as under :-- "(a) Every applicant (coupon holder) is entitled to opt for purchase of an immovable property (housing unit/commercial unit) in the present or future schemes promoted/to be promoted by the company at its various sites. The applicant may request for change in his/her preference at any time during the currency of the coupon. (b) The credit value as mentioned in para (7) above can be availed/utilised by the applicant on producing the receipt for advance payment along with the coupon and Passbook for any of the following purposes:- (I) Purchase of immovable property (housing unit/commercial unit) and/or products and/or services as offered by the company: (II) Purchase of products/services as offered by its business associates from time to time; Provided that the credit value standing in the name of the same person shall stand consolidated and the actual redemption/utilization of such value shall not exceed 30 per cent of the sale price of the immovable....
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....or technical assistance, in relation to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management, of real estate" So "real estate agent" means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting, of real estate and includes a real estate consultant. From the facts discussed hereinabove, we find that the applicant have mobilised fund for SICCL (their principal) and the amounts were for the purposes discussed hereinabove. The "real estate consultant" is a person who renders, in any manner, either directly or indirectly, advice, consultancy or technical assistance, in relation to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management, of real estate. The facts in this case are that the applicants are providing the services of mobilising deposits for their principal and the said depositor is having an option either to withdraw the maturity value after specified period of time or the depositor can purchase immovable property or can purchase goods or avail the services provided b....
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....ovable property, that part of the funds is prima facie is covered under remuneration for "Real Estate Consultant". In the case of Indus Tubes Ltd. (supra), this Tribunal has held that the term "engaged in or in relation to" used in statutory definition widens the scope of definition. Therefore, prima facie we find that the applicant is covered under the category of "Real Estate Agent Service" for 10 per cent of the total demand of service tax under this head. 8.4 The applicants have received a total commission of 11 per cent on such mobilisation of funds (2.5 per cent as commission and 8.5 per cent as reimbursable expenses). In the impugned order the reimbursable expenses were also included in the value of taxable services by the adjudicating authority on the ground that the applicants have not submitted any clinching evidence as to how these expenses were incurred and how it were specifically related to services provided to their clients. In this regard, the applicants have claimed that reimbursable expenses do not form part of value of taxable services as the said amounts were not received towards rendering taxable services but were received for the expenses incurred by the ap....
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.... & Rajat Yojana. 9. Issue No. 2 - Land Procurement Charges : 9.1 This activity of the applicants was in relation to verification of land/title documents etc. as per the definition of Real Estate Agent Services (supra). We find that the verification of land documents are directly related to "real estate agent services". The ld. advocate have submitted that although they are liable to pay service tax under the category of Real Estate Agent Service on land procurement charges as per the agreement between themselves and as SICCL up to 31-3-2006, but they have not received any amount towards land procurement charges. In support of this contention they relied on the certificate issued by the Chartered Accountant D.S. Shukla & Co. wherein they have clarified as under :-- "We have to further clarify that the aforementioned amounts were also shown in the Notes on accounts in the Balance Sheet of the Firm under Related Party Disclosure. As part of this note, disclosure was made about the details of transactions undertaken by the Firm with its related parties in terms of "Accounting Standard 18 - Related party Disclosures" issued by the Institute of Chartered Accountants of India. Transact....
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....he demand on this account is prima facie sustainable. 10. Issue No. 3 - Mobilising application for Sahara debentures/bonds The demand has been confirmed under the category of "Business Auxiliary Services." 10.1 Section 65(19) defines "Business Auxiliary Service" which is reproduced hereunder:- "(19) "business auxiliary service" means any service in relation to -- (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services which are inputs for the client; or Explanation.--For the removal of doubts, it is hereby declared that for the purpose of this sub-clause, "inputs" means all goods or services intended for use by the client; (v) production or processing of goods for, or on behalf of the client; (vi) provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, ....
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....tionable claim hence they are not covered under the definition of "Goods" in Sale of Goods Act which is borrowed for the purpose of service tax. To support this contention, the applicants have relied on the decision of the Apex Court in Reliance Inds. Ltd. (supra) wherein the Apex Court has categorically held that the debentures are in the nature of "actionable claim", and that the same is excluded from definition of "goods". In this case also, the matter relates to MRTP Act where the definition of "goods" was borrowed from the "Sale of Goods Act, 1930." We have gone through the decision of the Apex Court in the case of Reliance Inds. Ltd. (supra) wherein the Hon'ble Apex Court has observed as under : -- "16. Debentures, as ordinarily understood, in our considered view, would not come within the purview of the definition of goods as it is simply an instrument of acknowledgement of debt by the company whereby it undertakes to pay the amount covered by it and till then it undertakes further to pay interest thereon to the debenture-holders. 17. It has been observed by the Company Law Committee in its report quoted by Ramaiya, at p. 26 of his commentary : "A debenture means a docume....