TaxTMI 
TaxTMI 
2023 (7) TMI 1386
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.... to the first show cause notice dated 18.11.2016, the Principal Commissioner has confirmed the demand of Rs. 2,80,71,100/- with interest and penalty out of the total demand of Rs. 20,53,16,530/- and has dropped the demand for the remaining amount. With respect to the second show cause notice dated 05.04.2018, the Principal Commissioner has confirmed the demand of Rs. 3,42,50,377/- with interest and penalty out of the total demand of Rs. 17,12,17,363/- and has dropped the remaining demand. This appeal has been filed by the Corporation for setting aside the demand that has been confirmed by the Principal Commissioner. 2. Service Tax Appeal No. 52404 of 2019 has been filed by the department for setting aside the order passed by the Principal Commissioner to the extent it dropped the demand with regard to the first show cause notice dated 18.11.2016. Service Tax Cross Objection No. 50757 of 2022 has been filed by the Corporation with a prayer that this appeal filed by the department may be dismissed. 3. Service Tax Appeal No. 52405 of 2019 has been filed by the department for setting aside that portion of the order of the Principal Commissioner that dropped the demand proposed in....
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....ner; (vi) Liquidity Damages from supplier: When the manufacturers default in preparing correct cost sheet for submission to the Corporation, a penalty is levied; and (vii) Miscellaneous Receipts Other Non-Operating income and others: These Charges are recovered against shortage of stock in depot. 5. The aforesaid appeals pertain to the show cause notice dated 18.11.2016 for the period 01.04.2011 to 31.03.2015 and the show cause notice dated 05.04.2018 for the period 01.04.2015 to 01.06.2017. These two show cause notices allege that the Corporation had earned commission on sale of liquor and the balance sheet/trial balance also showed income under the head 'other incomes', but the Corporation had not paid service tax which was required to be deposited by it under 'business auxiliary services' [BAS] prior to 01.07.2012 and, thereafter, as a taxable service not covered either in the negative list of services or exempted list of services. The show cause notice alleged that the Corporation was not a purchaser of liquor and it was merely providing sales, marketing activities covered under BAS. The show cause notice separated the taxability of service prior to 01.07.2....
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....y service on which service tax is leviable tinder Section 66B of the said Act. Service tax under Section 66B of the Act ibid, is leviable on all the services except for the services mentioned in the Negative list of services provided under Section 66D of the Act ibid or where Government has extended exemption to any service by way of Notification issued under the said Act. It appears that the service so provided by the RSBCL is not covered in negative list of services given in Section 66D of the Act ibid and there appears to be no exemption to the said service from payment of service tax which is leviable under Section 66B ibid, therefore, the RSBCL is liable to pay service tax on the said taxable service provided by them even after 1.7.2012. (emphasis supplied) 6. The show cause notice also invoked the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act 1944 [the Finance Act]. 7. For the period 01.04.2015 to 01.06.2017, a second show cause notice dated 05.04.2018 was issued to the appellant on allegations similar to the allegations contained in the first show cause notice dated 18.11.2016. 8. It transpires that for the perio....
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....pex Court and that there has been no change in the terms and conditions of the agreement between the notice and suppliers, except the rates of commission; I find that Service Tax cannot be demanded from the noticee on the commission charged by them even in the service tax regime post 1-7-2012. 35. Having decided that the commission or the margin collected by the noticee do not come within the mandate of the service tax by virtue of sale of goods, the next allegation in the show cause regarding levy of service tax upon other incomes or miscellaneous income, as shown in balance sheets of various years of the notice, need to be examined. xxxxxxxxxxxx 38.2 The noticee has also placed reliance upon the decision of the Apex Court in the case of Intercontinental Technocrats and Consultant Pvt. Ltd. contending that any reimbursement made by the supplier is ultra-virus section 67 of the Finance Act. It would appear from the said contention is that the assessee is claiming that the charges collected or paid to them by the suppliers fall in the category of reimbursement for certain activities undertaken by them. However, I find that the said contention is not applic....
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....12.10.2017 SLP (Civil) Diary No. 21662/2018 filed by department dismissed on 16.07.2018 2. 01.09.2007 to 31.03.2011 Show cause notice dated 11.10.2012 creating demand for tax on alleged commission on Sale of Liquor Order dated 30.12.2013 was passed upholding the demand Order dated 30.11.2017 setting aside the demand Appeal No. 105/2018 filed by department dismissed on 27.11.2019 3. 01.04.2011 to 31.03.2015 Demand created of Rs. 20,53,16,530/- by notice dated 18.11.2016 Order dated 31.05.2019 upholds the demand of Rs. 2,80,71,100/- and interest and penalty thereon (rest dropped against alleged commission) Impugned in the present appeal 4. 01.04.2015 to 01.06.2017 Demand created of Rs. 17,12,17,363/- by notice dated 05.04.2018 Order dated 31.05.2019 upholds the demand of Rs. 3,42,50,377/- and interest and penalty thereon (rest dropped against alleged commission) 13. The Corporation has filed service Tax Appeal No. 52414 of 2019 to set aside the demand confirmed by the Principal Commissioner, while Service Tax Appeal No. 52404 of 2019 and Service Tax Appeal No. 52405 of 2019 have been filed by the department for setting asid....
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....butor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket. (b) ***** (c) *****" 15. It is, thus, clear that where service tax is chargeable on any taxable service with reference to its value, then such value shall be determined in the manner provided for in (i), (ii) or (iii) of subsection (1) of section 67. What needs to be noted is that each of these refer to 'where the provision of service is for a consideration', whether it be in the form of money, or not wholly or partly consisting of money, or where it is not ascertainable. In either of the cases, there has to be a 'consideration' for the provision of such service. Explanation to sub-section (1) of section 67 defines 'consideration' to include any amount that is payable for the taxable services provided or to be provided, or any reimbursable expenditure, or any amount retained by the lottery distributor or selling agent. It is clear from the aforesaid definition of 'cons....
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....t, therefore, clearly follows that foreclosure charges are recovered as compensation for disruption of a service and not towards "lending" services. In fact, the amount for processing charges and documentation charges or like charges are subjected to service tax because they are essential for the activity of lending and are treated as activities "in relation to lending". Foreclosure is anti-thesis to lending and, therefore, cannot be construed to be "in relation to lending". The phrase "in relation to lending" cannot be so stretched so as to bring within its ambit even activities ***** ***** 46. Thus, merely because the clause relating to damage is featuring in a contract, it would be incorrect to conclude that the party has been given an option to violate the contract. Hence, to treat eventuality of foreclosure as an optional performance is incorrect. The contract cannot be understood to be providing an option to the parties to either perform or not perform/violate." 19. In South Eastern Coalfileds, the Tribunal held that liquidated damages recovered on account of breach or non-performance of contract are not consideration in view of any service but are ....
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.... may result in a deemed service contemplated under section 66E (e). 30. The activities, therefore, that are contemplated under section 66E (e), when one party agrees to refrain from an act, or to tolerate an act or a situation, or to do an act, are activities where the agreement specifically refers to such an activity and there is a flow of consideration for this activity. ***** 32. In the present case, the agreements do not specify what precise obligation has been cast upon the appellant to refrain from an act or tolerate an act or a situation. It is no doubt true that the contracts may provide for penal clauses for breach of the terms of the contract but, as noted above, there is a marked distinction between 'conditions to a contract' and 'considerations for a contract'. 20. The Circular dated 28.02.2023 issued by the Central Board of Indirect Tax and Customs also provides that service tax cannot be levied on the amount collected for the said purpose and it is reproduced below: "4. As can be seen, the said expression has three libs: - i) Agreeing to the obligation to refrain from an act, ii) Agreeing to the obligation to to....
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.... 2022, may also be referred to in this regard." (emphasis supplied) 21. The Commissioner, therefore, was not justified in confirming the demand of Rs. 2,80,71,100/- while adjudicating the first show cause notice dated 18.11.2016 nor was the Commissioner justified in confirming the demand of Rs. 3,42,50,377/- while adjudicating the second show cause notice. The order dated 31.05.2019 passed by the Commissioner to the extent it confirms the aforesaid demand of service tax deserves to be set aside. Service Tax Appeal No. 52414 of 2019 filed by the Corporation, therefore, deserves to be allowed. 22. Service Tax Appeal No. 52404 of 2019 and Service Tax Appeal No. 52405 of 2019 have been filed by the department to assail that part of the order of the Principal Commissioner that drops the demand. The Principal Commissioner has dropped the demand in view of the decision of the Rajasthan High Court in Rajasthan State Beverages Corporation vs. Commissioner of C. Ex., Jaipur 2018 (11) G.S.T.L. 157 (Raj.). The Rajasthan High Court relied upon the decision of the Chhattisgarh High Court in Union of India vs. M/s. Chhattisgarh Estate Beverages Corporation Tax Case No. 6/2009 decid....