TaxTMI 
TaxTMI 
2025 (8) TMI 996
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....ance Act, 1994; (ii) I order for recovery of appropriate Interest at the appropriate rates on the amount of Service Tax & Education Cess confirmed at (i) above under the provision of Section 75 of the said Act (iii) I impose penalty of Rs. 94,38,622.00(Rupees Ninety Four Lakhs Thirty Eight Thousand Six Hundred Twenty Two Only) under Section 78 of the Finance Act, 1904, as amended, for contravention of various provisions of Finance Act, 1994 and Service Tax Rules, 1994. (iv) I impose a Penalty @ 2% per month of the tax payable from the due date of payment of service tax till the date of actual payment of the outstanding amount of service tax in respect of show cause notices dated 29.04.2011 and dated 14,09.2011, subject to a maximum penalty of Rs. 43,18,193.00 (Rupees Forty Three Lakhs Eighteen Thousand One Hundred Ninety Three only)under the provisions of Section 76 of the Finance Act, (v) I impose a Penalty of Rs. 1,00,000.00 (Rupees One Lakh Only) under Section 77 of the Finance Act, 1994 for the contravention of various provisions of Finance Act, 1994 and Service Tax Rules, 1994 as discussed in para 44 and 44.01 above. (vi) I drop dem....
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....r-V of the Finance Act, 1994; (ii) Interest at the appropriate rates on the amount of Service Tax & Education Cess not paid, should not be demanded and recovered from them under the provision of Section 75 of the said Act. (iii) Penalty should not be imposed upon them under Section 76 of the Finance Act, 1994 in as much as they failed to pay due Service Tax on the said services as stated above. (iv) Penalty should not be imposed upon them under Section 77 of the provisions of Finance Act 1994 as amended of the Finance Act, 1994 in as much as they failed to furnish the prescribed returns in time and take Registration within the prescribed period: (v) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994 as amended in as much as they had suppressed facts as well as deliberately contravened various provisions of Finance Act, 1994 and Service Tax Rules, 1994 with intent to evade Service Tax on the said Services as stated herein above:" 2.4 For the subsequent periods, three more show cause notices were issued to the appellant, as detailed below: Demand of Service Tax for subsequent periods. Show Cause Notice Date ....
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..../2019] • Adjudicating Authority has arrived at the incorrect finding that since the land used for parking is appurtenant to the main building, the same would get covered under the definition of "immovable property", hence, taxable,. • Since the land let out by the Appellant was used for parking purposes, the same would be out of scope of levy of service tax as per exclusion provided under clause (c)to Explanation 1 appended to Sec. 65(105)(zzzz) of the Act. • Thus in view of the above submissions the entire demand needs to be set aside along with the interest and penalties. 3.3 Authorized representative reiterates the findings recorded in the impugned order. 4.1 We have considered the impugned order along with the submissions made in the appeal and during the course of arguments. 4.2 Three issues can be flagged for our consideration in this appeal. I. Demand of Service Tax under the category of Business Support Services; II. Demand of Service Tax under the category of renting of immovable property services; III. Demand of service tax on reverse charge basis on import of services under the category of Busines....
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....ospitals and the individual doctors. Typically, the arrangement contains details like duration of time for consultation, the obligations on the part of the doctors, fee to be paid, procedure for termination of agreement, etc. The agreements generally talk about appointment of consultants to provide services to the patients who will visit or admitted in the appellants hospital. The doctors will receive a percentage of share of the collection from the patients in case of consultation, procedures and surgeries done by them. In some cases, there is a provision for treating patients from low economic background without any financial benefits. On careful consideration of various terms and conditions and the scope of arrangement, we are of the considered view that such arrangement are for joint benefit of both the parties with shared obligations, responsibilities and benefits. The agreements do not specify the specific nature or list of facilities which can be categorized as infrastructural support to the doctors. The revenue model, as agreed upon between the contracting parties also, did not refer to any consideration attributable to such infrastructural support service. 6. The ....
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....h, to bring in a tax liability on the appellant hospital, it should be held that they are providing infrastructural support services in relation to business or commerce. That means, the doctors are in business or commerce and are provided with infrastructural support. This apparently is the view of the Revenue. We are not in agreement with such proposition. Doctors are engaged in medical profession. As examined by Hon'ble Gujarat High Court in Dr KK Shah (supra), though in an income-tax case, we note that there is a discernable difference between "business" and "profession". The Gujarat High Court referred to decision of Hon'ble Supreme Court in Dr Devender Surt is AIR 1962 SC 63. The Supreme Court observed as below: "There is a fundamental distinction between a professional activity and an activity of a commercial character" : "...a "profession"... involves the idea of an occupation requiring either purely intellectual skill, or of manual skill controlled, as in painting and sculpture, of surgery, by the intellectual skill of the operator, as distinguished from an occupation which is substantially the production or sale or arrangements for the production or sale of commodities" ".....
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....establishment providing health care services are exempted from service tax. The view of the Revenue that in spite of such exemption available to healthcare services, a part of the consideration received for such health care services from the patients shall be taxed as business support service/taxable service is not tenable. In effect this will defeat the exemption provided to the health care services by clinical establishments. Admittedly, the health care services are provided by the clinical establishments by engaging consultant doctors in terms of the arrangement as discussed above. For such services, amount is collected from the patients. The same is shared by the clinical establishment with the doctors. There is no legal justification to tax the share of clinical establishment on the ground that they have supported the commerce or business of doctors by providing infrastructure. We find that such assertion is neither factually nor legally sustainable. 12. The Revenue has filed an appeal against order dated 01.02.2016 of Commissioner of Service Tax, Delhi-I. In similar set of facts, as discussed above, the Commissioner, after detailed examination, held that the responde....
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....of furtherance of business or commerce" includes use of immovable property as factories, office buildings warehouses, theatres, exhibition halls and multiple-use buildings; With effect from 16.05.2008, the above Explanation has been numbered as Explanation I, and the following Explanation 2 has been inserted: "Explanation 2- For the removal of doubts, it is hereby declared that for the purposes of clause 'renting of immovable property includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property. 32.01 Further, under sub-clause (zzzz) of section 65(105) of the Act, the taxable service is defined as any service provided or to be provided "to any person, by any other person, in relation to renting of immovable property for use in the course of furtherance of business or commerce". The two Explanations in this sub-clause read as follows: 'Explanation 1 - For the purposes of this sub-clause, 'immovable property' includes- (i) building and part of a building, and the land appurtenant thereto; (ii) land incidental to the use of suc....
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....nd that there is no dispute about the fact that the land used for parking is appurtenant to the main building. Further, the exclusion clause is only in respect of land used for parking purposes. The exclusion is not in respect of "Cemented space' used for parking purposes, which is appurtenant to any building and especially developed as parking space for vehicles. Accordingly, land used for parking purposes, which is appurtenant to noticee's building will be covered within the definition of 'Immovable Property' and accordingly, renting out of such property will attract levy of service tax. 32.06 I also find that what the legislature intended to exempt from payment of service tax was land used for general parking at public places. 32.07 Noticee's reliance on the judgment of the Hon'ble Delhi High Court in the case the renting of immovable property for use in course of furtherance of business or context. In the case law cited by the noticee the Hon'ble High Court has held that of Home Solution Retail India Ltd. Vs Union of India (2009) 20 STT 129 is also out of commerce by itself does not entail any value addition and therefore could not ....
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....ot be open to the Courts to adopt any other hypothetical construction on the ground that such construction is more consistent with the alleged object and policy of the Act. 20. In applying rule of plain meaning any hardship and inconvenience cannot be the basis to alter the meaning to the language employed by the legislation. This is especially so in fiscal statutes and penal statutes. Nevertheless, if the plain language results in absurdity, the Court is entitled to determine the meaning of the word in the context in which it is used keeping in view the legislative purpose.2 Not only that, if the plain construction leads to anomaly and absurdity, the court having regard to the hardship and consequences that flow from such a provision can even explain the true intention of the legislation. Having observed general principles applicable to statutory interpretation, it is now time to consider rules of interpretation with respect to taxation. 21. In construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or....
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.... and no more.- Also termed (in senses 1 & 2) strict construction, literal interpretation; literal construction; restricted interpretation; interpretatiostricta; interpretatio restricta; interpretatio verbalis. 3. The philosophy underlying strict interpretation of statues.- Also termed as close interpretation; interpretatio restrictive. See strict constructionism under constructionism. Cf. large interpretation; liberal interpretation (2). "Strict construction of a statute is that which refuses to expand the law by implications or equitable considerations, but confines its operation to cases which are clearly within the letter of the statute, as well as within its spirit or reason, not so as to defeat the manifest purpose of the legislature, but so as to resolve all reasonable doubts against the applicability of the statute to the particular case.' Willam M. Lile et al., Brief Making and the use of Law Books 343(Roger W. Cooley & Charles Lesly Ames eds., 3d ed. 1914). "Strict interpretation is an equivocal expression, for it means either literal or narrow. When a provision is ambiguous, one of its meaning may be wider than the other, and the strict (i.e., narrow) se....
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.... interpretation, namely contextual or purposive interpretation cannot be applied nor any resort be made to look to other supporting material, especially in taxation statutes. Indeed, it is well settled that in a taxation statute, there is no room for any intendment; that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification. Equity has no place in interpretation of a tax statute. Strictly one has to look to the language used; there is no room for searching intendment nor drawing any presumption. Furthermore, nothing has to be read into nor should anything be implied other than essential inferences while considering a taxation statute. 26. Justice G.P. Singh, in his treatise 'Principles of Statutory Interpretation' (14thed. 2016 p. - 879) after referring to Re, Micklethwait, (1885) 11 Ex 452; Partington v. A.G.,(1869) LR 4 HL 100;Rajasthan Rajya Sahakari Spinning & Ginning Mills Federation Ltd. v. Deputy CIT, Jaipur, (2014) 11 SCC 672,State Bank of Travancore v. Commissioner of Income Tax,(1986) 2 SCC 11 and Cape Brandy Syndicate v. IRC, (1921) 1 KB 64, summed up the law in the following manner....
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....3]. Considerations of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity [Mapp v. Oram, (1969) 3 All ER 215]. It has also been said that if taxing provision is "so wanting in clarity that no meaning is reasonably clear, the courts will be unable to regard it as of any effect [IRC v. Ross and Coutler, (1948) 1 All ER 616]." Further elaborating on this aspect, the learned author stated as follows: "Therefore, if the words used are ambiguous and reasonable open to two interpretations benefit of interpretation is given to the subject[Express Mill v. Municipal Committee, Wardha, AIR 1958 SC 341]. If the Legislature fails to express itself clearly and the taxpayer escapes by not being brought within the letter of the law, no question of unjustness as such arises [CIT v. Jalgaon Electric Supply Co., AIR 1960 SC 1182]. But equitable considerations are not relevant in construing a taxing statute, [CIT, W.B. v. Central India Industries, AIR 1972 SC 397], and similarly logic or reason cannot be of much avail in interpreting a taxing statute [Azam Jha v. Expenditure Tax Officer, Hyderabad, AIR 1972 SC 2319]. I....
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....inance Act, do not cover the activities undertaken by them as Health Service providers, therefore the services provided to them by the Health Facilitators cannot be classified under this category, of Business Auxiliary Services. 4.5.2 The grounds taken by the appellant in the appeal before us are not the same grounds which were taken before the adjudicating authority. Impugned order records the findings as follows while confirming this demand: "A. Non payment of Service Tax on Business Auxiliary Services 30. I find that the demand on this count has been raised on the noticee under reverse charge mechanism on the money paid by the noticee to foreign based entities for referring patients to them. 1also find that as submitted by the noticee they are paying a fixed percentage to the agent of the total bill raised by them on the referred foreign patient. 30.01 I find that promoting and marketing noticee's services and referring foreign patients by the agents to the noticee for a consideration (Commission) are squarely covered under the definition of "Business Auxiliary Services" as prevalent during the material time. 30.02 "Business Auxil....
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....o sale or marketing of the goods. However, this, exemption was withdrawn w.e.f 09.07.2004 vide Notification No. 8/2004-ST. 30.05 Admittedly, the agents are promoting/marketing the services provided by the noticee and the noticee is paying a fixed percentage of the total bill amount to the agents. I further find that the noticee has not contested the nature of the services The noticee has contested this demand only on the ground that their agents have provided these services outside India and have at no point of time visited India to perform the same either in part or in full The scope of the services provided by these agents inter alia includes marketing the services provided by them to prospective customers staying overseas, and to refer the patients to their hospital. The services were only performed by the agents outside India and accordingly received by them outside India. 30.06 I do not agree with the contention of the noticee. Definitely, the services in question were performed by the agents outside India, but the services were used by the noticee in their business and commerce and for the promotion of their business Recipient of a service is a person who re....
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....shall be treated as separate persons for the purposes of this section. Explanation 1 A person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country. Explanation 2. - Usual place of residence, in relation to a body corporate, means the place where it is incorporated or otherwise legally constituted 30.09 I find that taxability of services under 'Reverse Charge Mechanism' has attained finality in view of the judgment of Hon'ble Bombay High court in Indian National Ship-owners Association V. UOI 2009 (13) S.T.R. 235 (Bom.). The Order of the Hon'ble high Court has been maintained by the Hon'ble Supreme Court of India, reported as 2010 (17) STR J 57 (SC). The order of the Hon'ble Bombay High Court is reproduced below:- 7. The learned Counsel submitted that reading of sub-section 2 of Section 68 and this notification along with the scheme of the Act shows that under this notification the recipients of service cannot be made liable for levy of service tax. The learned Counsel further submitted that on 16-6-2000 the Service Tax Rules 1994 were amended a....
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....eived services to their vessels and ships outside India. With effect from 18-42006 Section 66 A was added to the Act, which reads as under :- "(1) 66A (1) Where any service specified in clause (105) of section 65 is, - (a) provided or to be provided by a person who has established a business or has a fixed establishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India, and (b) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or usual place of residence in India, such service shall, for the purposes of this section, be the taxable service, and such taxable service shall be treated as if the recipient had himself provided the service in India and accordingly all the provisions of this Chapter shall apply; Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section shall not apply; Provided further that where the pro....
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....ovisions of Section 68(2) as it existed prior to issue of Notification No. 36/2004-ST, dated 31-12-2004 rather than negating its existence or challenging its vires since the date of its incorporation, i.e. 1-8-2002. The statutory effect created vide rule 2(1)(d)(iv) cannot be reduced by reference to a subsequently issued notification repeating the contents of the said rule. It was further submitted that in respect of the recipient of services who have been made liable to pay service tax on services received from foreign based persons, there is no denying the fact that the recipients of these services are the ultimate beneficiaries of the services rendered to them. Moreover, in the case of an indirect tax, it is the recipient of service who has to ultimately bear the incidence of a tax. Thus, the liability cast upon the recipient of service has a direct connection with him and there exists a direct nexus between recipient of these services from foreign based service provider and the Indian Union. 11. The learned Counsel appearing for both sides relied on the judgment of the Supreme Court in the case of Laghu Udyog Bharati v. Union of India, 2006 (2) S.T.R. 276 (S.C.) = 1999....
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....e services provided by the "Health Care Facilitators", from abroad to the appellant are "commission agent services" which have been included in the definition of Business Auxiliary Services defined by the Section 65 (19) of the Finance Act, 2019.In the case of Sahara India [Final Order No 70036/2024 dated 29.01.2024 in Service Tax Appeal No.979 of 2009] Allahabad bench has observed as follows: "4.3 From the definition of Business Auxiliary Service as per Section 65 (19) reproduced as above it is quite evident that for the period up to 09.10.2004, the clause (ii) was with reference to promotion and marketing of services provided by the client and clause (iv) was with reference to the incidental or auxiliary support services provided to the client. The clause (i), (ii), (iii) & (iv) were mutually exclusive and referred to different categories of activity which need not necessarily be in relation to the taxable service provided by the client. Counsel has argued that the client of appellant is in business of accepting deposits, which per-se is not a service hence the clause (ii) and (iv) of section 65 (19) would not be applicable to them, and their services cannot be taxed und....
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....mething, as electric power, water, transportation, mail delivery, telephones, etc. Anything useful, as maintenance, supplies, installation, repairs, etc., provided by a dealer or manufacturer for people who have bought things from him." 17. While the State raises its revenue by controlling dealing in liquor and/or by transferring its privilege to manufacture, distribute, sale etc., as envisaged under Entry 8 of List II of the Seventh Schedule of the Constitution of India, thereby it does not render any service to the society. Service tax purports to impose tax on services on two grounds (1) service provided to a consumer and (2) service provided to a service provider. 18. Service provided in respect of the matters envisaged under clause (19) of Section 65 of the Act must be construed strictly. Before a tax is found to be leviable, it must come within the domain of legitimate business and/or trade. The doctrine of res extra Commercium was invoked in the United States of America where keeping in view the nature of right conferred on its citizens and the concept of imposition of reasonable restrictions thereon being absent, it was held that gambling should be frowned....
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....the matter in hand is concerned the liability of the appellants is said to be in terms of Section 65(19)(ii) read with Section 65(105)(zzb) of the said Act. 62. Section 65(19) of the said Act defines the ―Business Auxiliary Services‖ and under clause (ii) thereof it provides that Business Auxiliary Service means, any service in relation to promotion or marketing of service provided by the client. Section 65(105)(zzb) defines the "Taxable Service means, any service provided or to be provided to a client by any person in relation to Business Auxiliary Service. In fact, the expression "any person" was substituted for the earlier expression "a commercial concern" since 18th April, 2006, consequent to the amendment to Finance Act. 63. Perusal of the above provisions of law, therefore, would disclose that a person can be said to have rendered Business Auxiliary Service in terms of the provisions of law in force, on being established that he has rendered service in relation to either promotion or marketing of some service provided by the client. The fact, that the service provider has rendered the service of promotion or marketing of the service provided to o....
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....d reported in 2008 (12) S.T.R. 401, Home Solutions Retail India Limited v. Union of India reported in 2009 (14) S.T.R. 433 = 2009 (237) E.L.T. 209 (Del.), Association of Leasing & Financial Service Companies (supra), All India Federation of Tax Practitioners v. Union of India reported in 2007-TIOL-149- SC-ST = 2007 (7) S.T.R. 625 (S.C.), Bharat Sanchar Nigam (supra) and Gannon Dunkerley's case. 78. In Tamilnadu Kalyana Mandapam Association case, the Apex Court while dealing with the issue as to whether the High Court was correct in coming to the conclusion that the provisions in the Finance Act, 1994 imposing Service tax on the services rendered by the Mandap Keeper were intra virus of the Constitution of India or not. After going through the scheme of the said Act and various judgements relevant for the decision in the matter, it was observed that the Mandap Keeper provide a wide variety of services apart from the service of allowing temporary occupation of mandap. Apart from proper maintenance of the mandap, they were providing the necessary paraphernalia for holding function, besides providing condition and ambience required by the customers which included provision for....
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....alyan Mandapam Association case held that the Supreme Court in Kalyan Mandapam case had held that the service of a Mandap Keeper does not involve transfer of movable property nor does it involve a transfer of any immovable property of any kind known to law either under the Transfer of Property Act or otherwise and therefore, the said activity could be only classified as a service. It was further held that the observation of the Supreme Court in Kalyan Mandapal case that the utilization of the premises as a mandap by itself would constitute a service was required to be distinguished from the kind of activity that is contemplated under Section 65(105)(zzzz) of the said Act. The case of a mandap and service provided by Mandap Keeper would not be applicable to a case of renting of immovable property simplicitor. It was further held that the Service tax is a value added tax. It is a tax on value addition provided by a service provider. It is, therefore, obvious that it must have connection with a service and there must be some value addition by that service. If there is no value addition then there is no service. In so far as renting of immovable property for use in the course of or fur....
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....equipment leasing companies. The Apex Court further observed that the significance of the said circulars and guidelines is to show that the activities undertaken by non-banking financial companies of equipment leasing and hire-purchase finance are facilities extended by nonbanking financial companies to their customers. They are financial services rendered by such non-banking financial companies to their customers and they fall within the meaning of the words banking and other financial services which were sought to be brought within the Service tax net under Section 66 of the said Act. Referring to the Sale of Goods Act and commentary of the said statute by Mulla, the Apex Court specifically observed that: "a common method of selling goods is by means of an agreement commonly known as a hire-purchase agreement which is more aptly described as a hiring agreement coupled with an option or purchase, i.e. To say that the owner lets out the chattel on higher and undertakes to sell it to the hirer on his making certain number of payments. If that is the real effect of the agreement there is no contract of sale until the hirer has made the required number of payments and he rema....
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....is, thus, a tax on activity whereas sales tax is a tax on sale of a thing or goods". Having held so, it was also ruled that: "A contract of sale is different from an agreement to sell and unlike other contracts, operates by itself and without delivery to transfer the property in the goods sold. The word ―sale‖ connotes both a contract and a conveyance or transfer of property. The law relating to building contracts was well known when Gannon Dunkerlay's case was decided and under that law the supply of goods as part of the works contract was not a sale. Thus, the essential ingredients of the ―sale‖ are agreement to sell movables for a price and property passing therein pursuant to an agreement". 83. Referring to the facts of the case of Association of Leasing & Financial Service Companies, the Apex Court held that : "the impugned levy relates to or is with respect to the particular topic of "banking and other financial services" which includes within it one of the several enumerated services, viz, financial leasing services. These include long time financing by banks and other financial institutions (including NBFCs). These....
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....e property as contended by some of the petitioners". It was further held that "a telephone service is nothing but a service. There is no sale element apart from obvious one relating to the hand set if any. That and any other accessory supplied by the service provider in our opinion remain to be taxed under the State Sales Tax Laws." It was also held that the nature of the transaction involved in providing the telephone connection may be a composite contract of service and sale. It is possible for the State to tax the sale element provided there is a discernible sale and only to the extent relatable to such sale. 85. In Gannon Dunkerley case it was held that if there is an instrument of contract which may be composite in form in any case other than the exceptions in Article 366(29A), unless the transaction in truth represents two distinct and separate contracts and is discernible as such, then the State would not have the power to separate the agreement to sell from the agreement to render service and impose the tax on sale. However, the said finding was preceded by the reasoning that "we are concerned herewith a building contract, and in the case of such a contract, the th....
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....ted project by Sahara Corporation. It does not relate to any service rendered by Sahara Corporation to others in relation to the sale of such properties or projects." 4.20 From the observations made in the said decision it is quite evident that the issue under consideration of the tribunal in this case was making distinction between sale and service. Tribunal has in the above decision nowhere concluded that the service rendered by the service recipient should have been taxable service. Similarly we do not find any such finding recorded by the tribunal in the case of Steria also. Therefore the submissions made by the appellant on the basis of these decisions cannot be accepted. We have referred to the memorandum of understanding, balance sheet and other documents in the earlier part of our order, and have concluded that the client of appellant was engaged in the business of providing services to his clients." 4.5.7 Also from the reading of para 10 of the decision in case of Steria India, we observe that said judgment has been rendered without recording any finding on the provisions of statue and fact. Even if some benefit has been extended without recording any reasons o....
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....hey failed to register themselves within 30 days of the said services becoming taxable. They did not file Service Tax Returns on time. Their non compliance and giving information in phases indicates their deliberate intention of non-compliance of service tax law and rules. It is on account of the investigation, that the evasion of Service Tax as explained above was detected. Thus, it is apparent that there was willful suppression of facts by the party and contravention of the provisions of the Finance Act, 1994 with an intent to evade payment of Service Tax on the value of taxable services. Therefore, the proviso of Section 73(1) of the said act has correctly been invoked for recovery of Service Tax." 4.7 At the time of argument appellant have not contested the invocation of extended period of limitation. It is quite evident from the facts of the case that fact of commission agent services received from the Health Care Facilitators, abroad was exclusively in the knowledge of the appellant. The said fact was never disclosed by the appellant to the revenue authorities prior to start of investigation. Further we also observe that extended period of limitation has been invoked only ....