TaxTMI 
TaxTMI 
2024 (2) TMI 964
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....gies India Pvt Ltd (herein after referred as M/s Altran) on 27.07.2020 and as per the said agreement, Appellant agreed to sell, transfer, grant, assign and deliver to M/s Altran all its rights, title and interest with respect to the business, as a going concern, free and clear from all encumbrances on a slump sale basis (as defined in Section 2(42C) of the Income Tax Act, 1961). Alleging that the activities of agreeing to obligations/refrain from certain activities for 2(two) years should be treated as a Declared service, investigation was carried out by DGGI and a Show Cause Notice(SCN) was issued on 19.12.2019. As per the SCN, it is alleged that the services provided by the Appellant to M/s Altran Technologies India Pvt. Ltd. is falling under the category of service under Section 66(E)(e). Thereafter the Adjudication authority confirmed demand of service tax and also imposed penalty on Appellants. Aggrieved by said order, present appeals are filed. 3. When the matter taken up for hearing, Learned Counsel for the Appellants drew our attention to the mega exemption Notification No. 25/2012-Service Tax dated 20/06/2012 issued by Ministry of Finance, where it is stated that "Servi....
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....Learned Counsel relied on the decision of Hon'ble High Court of Mumbai in the matter of Assistant Commissioner of Income Tax Vs Asea Brown Boveni Ltd (2007 (110) TTJ (Mum) 502. Thus, there is no such separate services intended to be received and no consideration assigned for the indemnity clause as alleged by the Respondent to demand service tax. 7. Learned Counsel further submits that determination of dominant character of an agreement is essential to demand tax. Learned Counsel drew our attention to the judgment of Hon'ble Supreme Court in the matter of M/s Bharat Sanchar Nigam Ltd (2006 (2) STR 161 (SC). Relevant paragraph reproduced is below:- "41. Gannon Dunkerley survived the 46th Constitutional Amendment in two respects. First with regard to the definition of 'sale' for the purposes of the Constitution in general and for the purposes of Entry 54 of List II in particular except to the extent that the clauses in Art. 366(29A) operate. By introducing separate categories of 'deemed sales', the meaning of the word 'goods' was not altered. Thus the definitions of the composite elements of a sale such as intention of the parties, goods, delivery etc. would continue to b....
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.... whether monetary or otherwise, should have flown or should flow from the service recipient to the service provider and should accrue to the benefit of the latter." In the said decision, the Larger Bench made reference to the concept of "consideration", as was expounded in the decision pertaining to Australian GST Rules, wherein a categorical distinction was made between "conditions" to a contract and "consideration". It has been prescribed under the said GST Rules that certain "conditions" contained in the contract cannot be seen in the light of "consideration" for the contract and merely because the service recipient has to fulfil such conditions would not mean that this value would form part of the value of the taxable services that are provided. 23. The Supreme Court in Commissioner of Service Tax vs. M/s. Bhayana Builders [2018 (2) TMI 1325 = 2018 (10) G.S.T.L. 118 (S.C.)], while deciding the appeal filed by the Department against the aforesaid decision of the Tribunal, also explained the scope of Section 67 of the Act, both before and after the amendment, in the following words : "The amount charged should be for "for such service provided": Section 67 clear....
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....tation is to be given to Section 67, it hardly needs to be emphasised that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider "for such service" and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service. 25. This position did not change even in the amended Section 67 which was inserted on May 1, 2006. Sub-section (4) of Section 67 empowers the rule making authority to lay down the manner in which value of taxable service is to be determined. However, Section 67(4) is expressly made subject to the provisions of subsection (1). Mandate of sub-section (1) of Section 67 is manifest, as noted above, viz., the service tax is to be paid only on the services actually provided by the service provider." ............................... ........................................ .................................... 27. What follows from the aforesaid decisions is t....
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....at such payment was for doing an act or for refraining from an act or for tolerating and act or situation. Payments such as liquidated damage for breach of contract, penalties under the mining act for excess stock found with the mining company, forfeiture of salary or payment of amount as per the employment bond for leaving the employment before the minimum agreed period, penalty for cheque dishonour, etc., are not a consideration for tolerating an act or situation. There are rather amounts recovered for not tolerating an act or situation and to deter such acts; such amounts are for preventing breach of contract or non-performance and are thus mere "events" in a contract. Further such amounts do not constitute payment (or consideration) for tolerating an act, because there cannot be any contract: (a) for breach thereof, or (b) for holding more stock than permitted under the mining contract, or (c) for leaving the employment before the agreed minimum period of (d) for doing something leading to the dishonour of the cheque. As has already being stated, unless payment has been made for an independent activity of tolerating an act under an independen....
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....g agreement would not have been entered into without the non-compete agreement or the trademark agreement. Therefore, the consideration paid under any one of the agreements cannot be viewed as a separate transaction in itself and has a bearing on the entire transaction. The very fact that when the JVA was terminate din 1996, all the 3 agreements also ceased to operate/exist is a clear pointer to the fact of inseparability of these agreements. If that be so, the consideration paid by PGG to GSL under the non-compete agreement and through G & B to GSL under the trademark agreement should have a definite bearing on the price paid by PGG to GSL under the manufacturing agreement and the pricing formula adopted therein. It is in this factual matrix, the applicability of Rule 5 of the Central Excise Valuation Rules, 1975 has to be considered. The said rule, as we have seen, provides for including additional consideration received from the buyer, whether directly or indirectly, by the assessee in the assessable value of the goods sold/supplied." 13. Learned DR also relied on the judgment of the Hon'ble Supreme Court in the M/s Bharat Sanchar Nigam Ltd (2006 (2) S.T.R 161 (SC) and submit....