TaxTMI 
TaxTMI 
2026 (7) TMI 11
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.... that, the appellant has engaged in providing various taxable services without payment of appropriate service tax, on the income earned by them, from their clients. The investigation culminated in the issuance of a show cause notice No.686/2010 dated 20.10.2010 for the period April 2005 to September 2009, which came to be adjudicated vide OIO No.11/2012, dated 27.03.2012. Subsequent Show Cause Notices No.171/2011 dated 08.04.2011, and No.87/2012 dated 04.04.2012, were pending adjudication, while the Statement of Demand No.368/2013 dated 26.11.2013, came to be issued to the appellant. The SOD has been issued for the short payment of service tax, for the period, October 2011 to March 2012, and states that, the facts and circumstances, leading to the issue of the present Statement of Demand, are identical to the earlier Show Cause Notices, and hence are not repeated. The SOD proposes demand of service tax payable of Rs.10,26,195/-, along with appropriate interest, and proposes imposition of penalty under Section 76 of the Finance Act. After due process of law, the Adjudicating Authority passed the Order in Original No.63/2016, dated 09.03.2016, wherein, it was also noticed that, the e....
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....009 to Sept. 2010 39,77,353/- OIO No 378 & 379/2016 30.06.2016 3. ST/42029/2016 87/2012 dated 4.4.2012 Oct. 2010 to Sept. 2011 30,40,599/- 7. The initial hearing had resulted in a difference of opinion as formulated in the Interim Order No.40009-40012/2023 dated 18.08.2023, which was thereafter, heard by the learned third member, who has held as under:- "14. Heard both sides and perused the records. The Points of difference referred are as follows:- POINTS OF DIFFERENCE (i) Whether the demand raised under 'Business Support Service' is to be sustained as held by Member(Technical)? OR Whether the demand raised under 'Business Support Service' is not sustainable and requires to be set aside as held by Member(Judicial)? (ii) Whether the penalty Imposed under Section 76 of the Finance Act, 1994 requires to be affirmed as held by Member(Technical)? OR Whether the penalty imposed under Section 76 of the Finance Act, 1944 is to be set aside as held by Member(Judicial)?. 15. The facts in brief are that the appellant are owning premises at Survey Number 34, Kanathur Reddy Kuppam Village, Ch....
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....d by the licensee at their cost and the insurance and maintenance of the said equipments shall be the responsibility of the licensee. e) Taxation: It shall be the responsibility of the licensee to pay the requisite sales tax, service tax, and such other charges, taxes, rates and levies by the statutory authorities on the sale / performance of agreed services (eg.: VAT in case of Food and Beverage sale or service tax for services offered) as per the provisions of this agreement. The statutory dues shall be paid by the licensee as and when they are due and the licensee agrees to indemnify the licensor from any claim arising there from. g) Waste disposal: The licensee shall be responsible for the removal of garbage, waste materials and for maintenance of the premises in neat and good condition. h) License for Operations: The licensee shall be responsible for obtaining necessary permission and sanctions from the authorities concerned for running the restaurant and the take away counters. Copies of the same shall be given to the Licensor. 17. The consideration for providing the place in their premises are recorded at para 5(a) and 5(b) of the said Agr....
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....evenue generation. i) Changes in Rates/Operations: The licensee agrees to give prior intimation in writing to the licensor about the changes in the operation and rates (eg.: menu prices or change of staff etc.). All prices and products In the said business would be decided only on consent of Licensor. j) Deposit: There shall be an interest free refundable security deposit of Rs.30,000/- during the signature, as a one time payment towards location allotted to licensee. 18. The contention of the Revenue is that the appellant has provided Business Support Services ('BSS' for short) to the licensees; hence taxable. 19. The learned Member(Technical) referring to the agreement and the Circular of the Board dt. 23.02.2009 observed that the service rendered is in the nature of BSS and the mode of payment of consideration cannot be the criteria in interpreting the entry BSS in the context of the said agreement. In other words, he has concluded that the appellant provided infrastructure facilities to their licensees; hence taxable. On the other hand, learned Member(Judicial) referring to the same Circular dated 23.02.2009 and the agreements between....
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....sharing basis i.e. a fixed and pre-determined portion i.e. percentage of revenue earned from selling the tickets goes to the theatre owner and the balance goes to the distributor. In this case, the two contracting parties act on principal-to-principal basis and one does not provide service to another. Hence, in such an arrangement the activities are not covered under service tax. 2.3 In yet another type of arrangement, the theatre owner buys the print/CD of the film on payment of a fixed price and thereafter screens it in his theatre. This transaction is also not subject to service tax being in the nature of sale of goods. 2.4 The arrangement most commonly entered into between a theatre owner and a distributor is that the theatre owner screens the movie for fixed number of days under a contract. The proceeds earned through sale of tickets go to the distributor but the theatre owner receives a fixed sum depending upon the number of days of screening. In this arrangement, the advertisement and display of posters etc. is done by the distributor. Under this arrangement, the fixed amount contracted is given to the theatre owner by the distributor irrespective of the fa....
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.... employing persons for billing purpose, the owner of the premises would have charged a component of fixed rent. Whereas, in the instant case it is agreed between the parties that the licensor would be paid 20% of the net revenue on sale of the food on a bi-weekly basis. This type of arrangement, similar to that of mentioned at para 2.2 of the aforementioned circular wherein it is clarified that no service tax is payable as it is in the nature of participation in the business and the income from the business is shared between the parties. This is evident from the fact that for some reason or otherwise if there is no income from the business of sale of food etc. on a particular day, for example due to strike, natural calamities, etc., the licensee would not be required to pay the appellant for occupying the space for carrying out the said business and using uninterrupted power supply and salary of employed persons for billing purposes. Therefore, the arrangement between the appellant and the occupier are purely on revenue sharing basis, hence, would not fall under the scope of Business Support Service. The aforesaid circular has been considered by the Tribunal in the case of INOX Lei....