TaxTMI 
TaxTMI 
2025 (11) TMI 195
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....India and received by the service recipient in India prior to 01.01.2005. (iii) Classification of services in relation to Starwood Preferred Guests Program [SPGP] and Frequent Flyer Program [FFP] (iv) Payment of service tax on "manpower recruitment or supply agency services"; and (v) Service tax computed on higher of the two values of the expenditure made in foreign currency. 3. The first issue was answered by the Commissioner in favour of ITC. The Commissioner held that it is only w.e.f. 18.04.2006, when section 66A of the Finance Act, 1994 [the Finance Act] was inserted, that services provided by a person who has established a business or has a fixed establishment from which the service is provided in a country other than India, and received by a person who has his place of business or fixed establishment in India became taxable and such taxable service shall be treated as if the recipient had himself provided service in India. Thus, no service tax could have been levied on the service provided prior to 18.04.2006. 4. In respect to the second issue, the Commissioner noticed that though rule 2(1)(d)(iv) of the Service Tax Rules, 1994 [the 1994 Rule....
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....services were received in India, the service tax liability arose with effect from 01.01.2005, on reverse charge basis, on the recipient of service in India. ***** Accordingly, the Noticees are liable to pay service tax from 01.01.2005 on such services that were provided by a service provider who was outside India and had no office or establishment in India but those services were received in India by the Noticees. 3.3.2 Under the agreements Sheraton had agreed to promote, market and sell the services of the Noticees outside India. Sheraton was to undertake the activities of promotion, marketing or sales through resources and means at its command outside India and promote, market or sell services of the Noticees outside India. The activities of Sheraton were definitely classifiable under the 'business auxiliary service'. The Noticees have not disputed the classification of services of Sheraton but has contested their liability to pay service tax under reverse charge mechanism before 18.04.2006. Though the activities of Sheraton were performed outside India yet the benefit of the services were received in India. The sale of the services provided by the Noticees by way of ren....
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....ll not be attracted for the following reasons: "3.4.3 For providing of service of business promotion and marketing there should be an agreement, express or implied, that one person shall promote, market or sell the goods or services of the other person to the third person or world at large. When such an activity is undertaken then the intention is to keep the business rivals at bay so that the profits or the goodwill of the service recipient is increased. The service provider has to convince the other persons about the quality of the services or goods of the services or goods of the service recipients and create an impression in the minds of the other persons that they shall be benefitted in terms of money, quality, feel goods factor or all of them if they buy the goods or avail the services of the service recipient. There is no allegation or evidence showing that for these two programmes, Sheraton was engaged in the business of promotion or marketing of services of the Noticees. The Noticees had not hired the services of Sheraton for conducting advertisements or a publicity campaign or selling of any services provided by them. Sheraton did not advertise or canvass the hot....
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....) Manpower supply to four hotels under "Operating Service Agreements" (ii) Manpower supply to five units on cost recovery basis. 8. The Commissioner also noticed that in addition, the show cause notices also proposed to recover service tax on manpower recruitment or supply agency services in the following two cases: (a) Services provided by G.J. Hamburger Production (b) Services provided by Mr. Michael Brian Agars 9. In regard to the first set relating to manpower supply to four hotels under "operating service agreements", the Commissioner observed: "3.5.4 The contentions of the Noticees, however, make a very strong point that they were not merely concerned with supply of manpower but had taken over the hotels from the owners to operate, manage and administer them as independent business units and the Noticees were involved in all aspects related to operating those hotels as successful business ventures. The agreements entered into between the Noticees and such hotels clearly show that the agreements were not for supply of manpower but for operating and managing the hotels. The agreements also reveal that in addition to the salary of the st....
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....ss to supply manpower. Their contention is unacceptable. It is not necessary that for an agency to be the 'manpower recruitment or supply agency' that the only or dominant engagement should be the manpower recruitment or supply. The definition is wide enough to include services provided directly or indirectly and in any manner. In any case, continuous supply of manpower to five persons for three years is sufficient reason to cover the Noticees in the definition of 'manpower recruitment or supply agency'. The Noticees have correctly been called upon to pay service tax on the 'manpower recruitment or supply agency's service' with respect to service being discussed in this paragraph and they are liable to pay service tax on the service rendered by them." (emphasis supplied) 11. Regarding the agreement with G.J. Hamburger Production, the Commissioner observed: "3.5.7 ***** In so far as their agreement with G.J.Hamburger Production is concerned they have admitted that the services rendered by G.J.Hamburger Production was in the category of 'manpower recruitment or supply agency's service' and they were liable to pay service tax and they have admitted that service ta....
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....er in which it has been computed in the show cause notice can be set aside only on the ground of being presumptive." (emphasis supplied) 14. Details of the five show cause notices containing the description of the service, the period of demand and the period beyond the normal period is shown in the following table: S. No. Show cause notice date Name of the service Period Beyond normal period/amount 1. 05.01.2007 BAS (Promotion and marketing) 01.07.2003 to 16.06.2005 Entire period is beyond normal period. Entire period is also prior to 18.04.2006 2. 17.10.2008 BAS (SPGP + FFP) July 2003 to June 2008 Beyond normal period is from July 2003 till April 2007 3. 23.10.2008 i. Manpower supply services ii. BAS (SPGP+FFP) iii. Commercial training & coaching services June 2005 to March 2008 April 2003 to March 2008 April 2003 to March 2008 Beyond normal period is from June 2005 till April 2007. Amount is Rs. 1,34,00,673/- out of total demand of Rs. 2,43,91,836/-. Beyond normal period is from April 2003 till April 2007. Amount is Rs. 1,51,37,141/- out of total demand of Rs. 2,80,86,783/- Beyond normal per....
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....ing to Rs. 1,01,25,811/- (Rs. One Crore one lac twenty five thousand eight hundred and eleven only) is required to be paid by the Noticees in relation to "manpower recruitment or supply agency's service" as a provider of services 4.3 Service Tax including Cess amounting to Rs. 11,99,700/- (Rs. Eleven lac ninety nine thousand and seven hundred only) is required to be by the Noticees in relation to "manpower recruitment or supply agency's service" as a recipient of service. 4.4 Service Tax including Cess amounting to Rs. 4,24,110/- (Rs. Four lac twenty four thousand one hundred and ten) is required to be paid by the Noticees in relation to foreign expenditure made on online access of reports. 4.5 Service Tax including Cess amounting to Rs. 1,70,904/- (Rs. One lac seventy thousand nine hundred and four) is required to be paid by the Noticees in relation to foreign expenditure made on certain reimbursements. 4.6 Interest under Section 75 of the Act'94 is to be paid by the Noticees on all the aforesaid amounts from the due date till the date of payment. 4.7 The Noticees are to pay penalty under Section 76 of the Act'94, which ....
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....otel, to Sheraton for administering the programmes. Whenever, a member-guest stayed in any of the hotels of the Noticees and redeemed his accumulated points for free stay, Sheraton compensated the Noticees for the free stay. Similarly in the FFP, whenever a member-guest availed free travel the partner-hotels compensated the airlines through Sheraton by way of contributing out of the expenditure made by the member-guest during his stay in the hotel." (emphasis supplied) 21. It is, therefore, clear from the aforesaid finding that the amount paid by a hotel, being 5% of the amount spent by the member guest, is for the purpose of administering the programme. On receipt of the amount, Sheraton compensates the hotels where the points are redeemed by the hotel guests. Similarly, in the FFP programme, the member airlines where the member guest avails free travel is compensated through Sheraton by way of contributing out of the expenditure made by the member guest during his stay in the hotel. It would also be pertinent to refer to paragraph 3.4.4 of the order and it is reproduced below: "3.4.4. ***** Each one of them contributed to the success of the schemes and some r....
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....me. This happens on account of the underlying Scheme of the programme on account of which the hotel guests come to stay in member hotels. Sheraton does not play any role in recommending any member guest to stay in any particular member hotel. The choice to stay in a member hotel is entirely of the hotel guest. No role is played by Sheraton to promote or market any particular hotel. The role is limited to administering the programme to ensure that the amount is received from the member hotel, where the hotel guests earn the points, by way of its contribution, so that the said amount is utilized for payment by way of reimbursement to the member hotel where the hotel guests redeem the points. 26. As such, no service or promotion or marketing is rendered by Sheraton to the member hotels where the hotel guest earns the points and makes its contribution for implementation of the programme. 27. Frequent Flyer works in the same manner. The points earned by using flights can also be redeemed at the hotels. 28. It is, therefore, not possible to accept the contention advanced by the learned authorized representative appearing for the department that the services provided by Sheraton ....
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.... and it was recovering such cost from the owners of the five hotels. Learned authorized representative also submitted that it is a fact that Michael Brian Agars had performed as an artist in the restaurants and, therefore, service tax should not have been dropped. 34. Learned senior counsel appearing for ITC, however, submitted that the issue involved is covered by the order dated 14.03.2018 of the Tribunal in Commissioner of Central Excise, Delhi vs. M/s. ITC Ltd.[ Service Tax Appeal No. 51447 of 2014 decided on 14.03.2018] for the subsequent period. Learned senior counsel also pointed out that the Commissioner committed no illegality in dropping the demand. 35. The submissions advanced by the learned authorized representative appearing for the department and the learned senior counsel for ITC have been considered. 36. In the decision rendered by the Tribunal on 14.03.2018 in the matter of ITC for the subsequent period, the Tribunal observed as follows: "5. The respondent, in this case, made agreements/ arrangements with the hotels namely, WH Rama International, Grand Bay, Srinivasa Resort, ITC Park (Chennai), Fortune Park Hotels Ltd., Maharaja Heritage Resorts L....
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....king up the higher amount is an incorrect way of issuing the show cause notice, and thus the demand being only on presumptive basis was required to be set aside. The Commissioner also observed that the department had not placed any evidence to sustain the allegations. The Commissioner also observed that the explanation offered by ITC in their reply to the show cause notice was reasonable and appeared to be correct and should be accepted unless the department was able place any evidence. The department has not been able to point out any error in the findings recorded by the Commissioner. FOURTH ISSUE 41. In the matter of Michael Brian Agars, the Commissioner observed that he was performing programs in the hotels as an artist and, therefore, there was no question of "supply of manpower service". There is no error in the finding recorded by the Commissioner. FIFTH ISSUE 42. To examine the extended period of limitation, it would be pertinent to refer to the finding recorded by the Commissioner that the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act could not have been invoked. The Commissioner observed as follows: "....
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....services under Section 68 (2). Only after notification of services under Section 68 (2) the legality of Rule 2 (1) (d) (iv) was upheld as discussed in paragraph 3.3.1. In such circumstances to charge the Noticees with suppressions of fact, misstatement or contravention of law with intent to evade payment of tax is unjustified and illegal. ***** 3.9.4 The invoking of extended period of limitation under proviso to Section 73 (1) was, therefore, unjustified and illegal. As the demand for non-payment of service tax is beyond the normal period of one year hence the demand is unenforceable. As no service tax is recoverable, no interest can be demanded from the Noticees. The circumstances under which penalty under Section 78 can be imposed are similar to invoking of extended period of limitation. The invoking of extended period of limitation has been held to be unjustified. Accordingly, there can be no ground to impose penalty under Section 78." (emphasis supplied) 43. Learned authorized representative appearing for the department submitted that the Commissioner committed an error in holding that the extended period of limitation could not have been invoked. ....
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.... (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "one year", the words "five years" had been substituted." 47. It would be seen from a perusal of sub-section (1) of section 73 of the Finance Act that where any service tax has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice on the person chargeable with the service tax which has not been levied or paid, requiring him to show cause why he should not pay amount specified in the notice. 48. The proviso to section 73(1) of the Finance Act stipulates that where any service tax has not been levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made there under with intent to evade payment of service tax, by the person chargeable with the service tax, the provisions of the said section shall ha....
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....ate under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed that since "suppression of facts‟ has been used in the company of strong words such as fraud, collusion, or wilful default, suppression of facts must be deliberate and with an intent to escape payment of duty. The observations are as follows: "4. Section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of court the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet t....
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....a substantial one and no intent to evade tax can be inferred by non-disclosure of the receipt in the service tax return. The relevant portion of the observations are: "28. In terms of the proviso to Section 73(1) of the Act, the extended period of limitation is applicable only in cases where service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, or collusion, or wilful misstatement, or suppression of facts, or contravention of any provisions of the Act or the Rules made thereunder with an intent to evade payment of service tax. However, the impugned show cause notice does not contain any allegation of fraud, collusion, or wilful misstatement on the part of MTNL. The impugned show cause notice alleges that the extended period of limitation is applicable as MTNL had suppressed the material facts and had contravened the provisions of the Act with an intent to evade service tax. Thus, the main question to be addressed is whether the allegation that MTNL had suppressed material facts for evading its tax liability, is sustainable. ***** 41. In the facts of this case, the impugned show cause not....
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....as justified in forming such an opinion as ultimately most of the demands have been dropped by the Commissioner. This contention advanced by the learned senior counsel of ITC deserves to be accepted in view of the judgment of the Supreme Court in Commissioner of C. Ex. & Customs vs. Reliance Industries Ltd. [2023 (385) E.L.T. 481 (S.C.)]. The Supreme Court held that if an assessee bona fide believes that it was correctly discharging duty, then merely because the belief is ultimately found to be wrong by a judgment would not render such a belief of the assessee to be mala fide. If a dispute relates to interpretation of legal provisions, the department would be totally unjustified in invoking the extended period of limitation. The Supreme Court further held that in any Scheme of self-assessment, it is the responsibility of the assessee to determine the liability correctly and this determination is required to be made on the basis of his own judgment and in a bona fide manner. The relevant portion of the judgment is reproduced below: "23. We are in full agreement with the finding of the Tribunal that during the period in dispute it was holding a bona fide belief that it was c....
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....in M/s. Raydean Industries vs. Commissioner CGST, Jaipur [Excise Appeal No. 52480 of 2019 decided on 19.12.2022]. The relevant portion of the decision of the Tribunal in Raydean Industries is reproduced below: "24. It would be seen that the ER-III/ER-I returns filed by the applicant clearly show that the applicant had categorically declared that it had cleared the final products by availing the exemption under the notification dated 17.03.2012. The applicant had furnished the returns on the basis of self assessment. Even in a case of self assessment, the Department can always call upon an assessee and seek information. It is under sub-rule (1) of rule 6 of the Central Excise Rules, 20028 that the assessee is expected to self assess the duty and sub-rule (3) of rule 12 of the 2002 Rules provides that the proper officer may, on the basis of information contained in the return filed by the assessee under sub-rule (1), and after such further enquiry as he may consider necessary, scrutinize the correctness of the duty assessed by the assessee. Sub-rule (4) of rule 12 also provides that every assessee shall make available to the proper officer all the documents and records for v....
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....alleged incorrect self-assessment itself is held to establish wilful suppression with an intent to evade. To invoke extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed simply because the assessee is operating under self-assessment." (emphasis supplied) 62. It would also be pertinent to refer to the decision of the Tribunal in M/s. India Glycols Limited vs. Commissioner of CGST & Central Excise [Excise Appeal No. 52129 of 2019 decided on 20.08.2024]. The Tribunal held: "39. What, therefore, transpires from the aforesaid decisions is that there can be a difference of opinion between the department and Revenue and an assessee may genuinely believe that it is not liable to pay duty. On the other hand, the department may have an opinion that the assessee is liable to pay duty. The assessee may, therefore, not pay duty in the selfassessment carried out by the assessee, but this would not mean that the assessee has wilfully suppressed facts. To invoke the extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed merely because the....
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....t before the Supreme Court to assail the aforesaid decision of the Tribunal in Sunshine Steel Industries was dismissed by the Supreme Court on 06.07.2023 and the judgment is reproduced below: "Delay condoned. 2. Heard learned counsel for the appellant. 3. This Court is not inclined to interfere with the impugned order of the High Court (Sic). 4. The appeal is dismissed. 5. Pending applications, if any, are disposed of." 65. Learned authorised representative appearing for the department also submitted that in case there was any doubt, ITC could have obtained clarification from the department, but as it did not obtain clarification it is evident that it suppressed facts with intention to evade payment of service tax. 66. This contention of the learned authorized representative appearing for the department cannot be accepted. There is no requirement for an assessee to seek clarification from the department, as was held by the Delhi High Court in Mahanagar Telephone Nigam. The relevant portion of the judgment of the Delhi High Court is reproduced below: "32. *********. Further, there is no provision in the Act which contemplat....