TaxTMI 
TaxTMI 
2026 (6) TMI 953
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....ntitled to a share in the Freight earned by Ministry of Railway (after deduction of expenses) by running locomotives on such railway system. In terms of the said Policy for Participative Investment Model, the Appellant was permitted by the Ministry of Railway to construct and maintain at the Appellant's cost, Railway line between Bhadrak and Dhamra Port. In terms of the said Policy, the Appellant received as return on its investment, apportioned share of 95% of freight collected by Indian railway after deduction of Indian railway's cost of operation and other fees/ charges and the said apportioned share received by the Appellant was termed as "User Fee". 2. In course of EA-2000 Audit, the department, on examination of the Appellant's Audited Balance Sheets and Independent Auditors' Reports, in which the receipt of the said User fee was reflected, raised Audit observation that the Appellant has rendered Business support service to the Indian railways and was liable to pay service tax thereon for the period 2011-12 to 2014-15. The Appellant responded to the said audit observation by their letter dated 20-42015, by which it was submitted that the Appellant has not rendered any serv....
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....nvestment requirement is huge. Ministry of Railway wishes to attract private capital for accelerated construction of fixed rail infrastructure and for that purpose has formulated participative investment models b) The participative investors could be State Government, Local Bodies, Industries, Ports, import-export companies, etc. c) The Advantages to Investors include return from investment in the rail projects d) Seamless operation between Indian railway Network and non-government railway system by Indian Railway with Indian Railway's rolling stock and locomotives. Indian Railway will recover cost of operation from non-government railway. Freight will be collected by Indian Railway. e) Investor will receive from Indian railway, apportioned share of 95% of freight net of cost of operation and other fees/ charges. Such apportioned share to be received by the Investor is termed as "User Fee". 3.3. In terms of the said Policy for Participative Investment Model, the Appellant was permitted by the Ministry of Railway to construct and maintain at the Appellant's cost, Railway line between Bhadrak and Dhamra Port. In terms of the said Policy, the App....
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....the sharing of the revenue between the two partners: (i) Railways and (ii) the appellant in this venture of building of railway line from Bhadrak to Dharma port. 3.6. He submits that the issue is no more res integra, as the issue stands decided in the following cases: CST v Bharuch Dahej Railway Company Ltd2020 (34) GSTL 565 In this decision in Para 7, the Hon'ble Tribunal has held that investing in the railway lines, so as to enable the railways to run their wagons on the same cannot be held as providing of any infrastructural services. It is further held that the cost of laying of the railway lines is being recovered from the railways, on revenue sharing basis, in terms of the agreement entered into between two. Mundra Port & Special Economic Zone Ltd v CCE 2012 (27) STR 171. In this decision in Paras 13 and 14, the Hon'ble Tribunal has held that as per the new policy of Ministry of Railways, the cost of laying down of railway lines is borne by private parties instead of the Government of India. The Railways operate the said railway and after recovering all the operation cost, pays the balance to the investor. Such payment is the cost ....
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....d when the assessee has maintained complete records and the amounts received are reflected in the Balance Sheets and Accounts, it cannot be said that there was willful suppression of facts and consequently the larger period of limitation cannot apply. Accordingly, he prays that the appeal may be allowed on account of time bar also. 7. The Ld. Special Counsel engaged by the Revenue submits that the Appellant's contention that they did not provide service to Railways is factually incorrect. The Appellant created dedicated railway infrastructure enabling Railways to commercially transport cargo connected with port operations. Without such infrastructure, the Railways could not have efficiently carried out freight operations connected with the port. The revenue-sharing arrangement demonstrates commercial reciprocity and quid pro quo. The periodic accrual of railway income establishes a continuous supply of infrastructural support services. The Appellant attempts to characterise the arrangement as a policy-based participative model without a service element. However, nomenclature or policy framework cannot determine taxability. The respondent submits that the real substance of the tr....
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....ise the rights and perform the obligations of the Railway Administration as specified under the said Act *Article 4 sets out the obligations of the Appellant, which include construction and maintenance of the Rail system at the Appellant's own cost and expense. Articles 5 and 11 sets out the obligations of the Ministry of Railway, which include providing support to the Appellant and providing wagons, locomotives and crew, fuel for locomotion of trains. Article 11.2 provides that the Appellant shall be responsible for and bear the cost incurred by Ministry of Railways for the locomotives, fuel, crew and overheads as provided in Schedule E 12. A harmonious reading of the above clauses would clarify that the appellant for the purpose of execution of this project steps into the shoes of Indian Railways for all purposes. The freight is realized by the Railways for operating in this route. Out of the total freight realized 95% is allocated to the appellant, with Railways retaining the balance 5%. This is a clear case of revenue sharing. 13. In case of any normal / general service, wherein the service is provided to the client, the percentage of margin towards the service w....
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....ach co-venturer contributing in some resource for the furtherance of the joint business activity. 14. The meaning of the term joint venture was interpreted by the Supreme Court in the case of Faqir Chand Gulati vs Uppal Agencies Pvt Ltd 2008 (12) STR 401 SC wherein the Apex Court quoted with approval the following extract from the American jurisprudence Second Edition Volume 15. An analysis of this judgment shows that in order to constitute a joint venture, the arrangement amongst the parties should be a contractual one, the objective should be to undertake a common enterprise for profit. Joint control over strategic financial and operative decisions was held to be the key feature of a joint venture. The other obvious feature of a joint venture would be that the parties participate in such a venture not as independent contractors but as entrepreneurs desirous to earn profits, the extent whereof may be contingent upon the success of the venture, rather than any fixed fees or consideration for any specific services. 16. In the instant case the agreement entered into between the Assessee and SWPL envisages that the Assessee would make available the land and ....
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....n by them for investing their resources in the venture. A contractor-contractee or the principal client relationship which is an essential element of any taxable service is absent in the relationship amongst the partners/co-venturers or between the co-venturers and joint venture. In such an arrangement of joint venture/partnership, the element of consideration i.e. the quid pro quo for services, which is a necessary ingredient of any taxable service is absent. 18. In our view, in order to render a transaction liable for service tax, the nexus between the consideration agreed and the service activity to be undertaken should be direct and clear. Unless it can be established that a specific amount has been agreed upon as a quid pro quo for undertaking any particular activity by a partner, it cannot be assumed that there was a consideration agreed upon for any specific activity so as to constitute a service. 19. We are accordingly of the view that activities undertaken by a partner/co-venturer for the mutual benefit of the partnership/joint venture cannot be regarded as a service rendered by one person to another for consideration and therefore cannot be taxed. 15.....
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....noticed by the department that transportation of goods and passengers was provided by Indian Railways and not by the appellant and collection of revenue was done by Indian Railways only that was being apportioned by stake holders, namely, participating State Governments and Indian Railways and the same was nothing but charges paid for allowing Indian Railways to use infrastructure of the appellant that is classifiable under 'Business Support Service' taxable under section 66B(44) of Finance Act for the period on or after 17-2012 and under section 65(104c) read with Section 105 (zzzq) of the Finance Act, 1944 for the prior period. Two show cause notices were accordingly issued on dated 2010-2014 for the period 2009 to 2014 and on dated 2-52016 for the period 2014 to 2015 demanding duty of Rs. 3,05,63,55,594/- and Rs. 84,86,10,952/-respectively with proposal for interest under Section 75 of the Finance Act, 1994, penalty under sections 76, 77 as well as equal penalty under section 78 of the said Finance Act, 1994 for the extended period. The appellant, having registered office at Mumbai, had unsuccessfully contested the same and thereafter approached this Tribunal for necessa....
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....he railways lines so as to enable the railways to run on the Adipur Mundra Port lines cannot be held as providing of any infrastructural services so as to boost the business of the service receiver. In fact as already observed, by agreeing to run railways between Adipur Mundra Port, it is the railways who have provided services to the appellants. Similarly, maintenance of the assets which are admittedly assets of the appellants does not amount to providing any business support services to the railways. As such, we find no infirmity in the view adopted by the Commissioner on this count and accordingly reject the appeal filed by the Revenue. INOX LEISURE LTD. Vs C S T HYDERABAD 2022 (60) G.S.T.L. 326 (Tri. - Hyd.) 10. In the present case the Department has alleged that the appellant is providing infrastructure support services to the producers/distributors of films under BSS. 11. It would be seen from the agreement that the SPE Films is a producer/distributor engaged in the business of production and distribution of films, while the appellant is an exhibitor engaged in the business of exhibition of films and owns/operates a chain of multiplex theatres under the b....