Customs, Excise and Service Tax Appellate Tribunal

Indo Hong Kong Industries (P) Ltd. v. C.C.E. & S.T., Delhi

MANU/CE/0195/2017

15.03.2017

Service Tax

Continuing link of Appellant with equipment and facilities is infrastructural support and covered by definition of 'Support Services of Business or Commerce'

Present appeal against Order-in-Original wherein demand of service tax of Rs. 1,02,21,578.00 along with interest and imposition of equivalent penalty has been confirmed against Appellant. Revenue's stand is that providing of office utilities, equipment and facilities by Appellant to recipient is covered under Business Support Services(BSS), which has been defined under Section 65(104c) of Finance Act 1994. Therefore, department has confirmed liability of service tax in case of amount collected under agreement-2 or 'hiring agreement' by Appellant-Assessee.

Appellant-Assessee provided certain equipments and facilities through a separate hiring agreement to M/s. Alcatel. Revenue is claiming that providing said equipment/facilities are covered under expression 'infrastructural support services' and would become part of definition of 'support services of business or commerce' or Business Support service (BSS), as defined under section 65(104c) of the Finance Act, 1994. Effective demand of service tax against Appellant is for period of 01st May, 2006 to 31st May, 2007 in case of collections made under Agreement-2 for hiring out equipment and utilities, which are termed as 'Infrastructural Support Service' and is said to be covered by Revenue under Business Support Services provided by Appellant-Assessee to M/s. Alcatel.

Dictionary meaning of infrastructure is - basic systems and services that are necessary for an organization to run smoothly. Appellant has provided air-conditioning plants, DG sets, chairs, work station, pantry and kitchen equipment, access control and security system and so on. From prudent persons' point of view, said equipment and facilities are certainly in nature of infrastructure. Appellant has provided them not on sale basis but on hiring basis. It means that there is continuous link of Appellant with these equipment and if during hiring period, there is any break-down in those systems, it would be responsibility of Appellant to get those fixed as per the recipient's wish and requirement. When there is a continuing link and nexus of Appellant with said equipment and facilities it cannot be called that this is not an 'infrastructural support'. And once it is an infrastructural support, fact of providing the said equipment and facilities would be covered by the definition of 'Support Services of Business or Commerce' as defined in Section 65(104c) of Finance Act, 1994 and, therefore, collections made on account of providing these equipment and facilities to M/s. Alcatel would be chargeable to service tax under Section 65(105zzzq) as 'Business Support Service' provided by the appellant to M/s. Alcatel.

As Appellant claims that they have discharged their service tax liability on hiring charges also for period of 01st June, 2007 to 31st March, 2010, tax paid by Appellant can be appropriated by department under service head of 'Business Support Services'. However, as service tax in case of Business Support Service came into effect from 1st March, 2006 though period involved here as w.e.f. 1st May, 2006, Appellant is liable for payment of service tax for services of 'business support service' on hiring charges received from M/s. Alcatel for said period of 1st May, 2006 to 31st May, 2007 along with interest.

Regarding penalty, Appellants stated that they voluntarily made payment of service tax along with interest prior to issue of show cause notice. Appellant, therefore, argues that imposition of penalties against them is not warranted and should be dropped as they bona fidely believe that their services were not taxable. In view of Nair Coal Services Ltd. Vs. CCE Nagpur, it appears that provisions of Section 80 of the Finance Act, 1994 would be applicable in case of Appellant-Assessee. Therefore, the penalties imposed on the Appellant-Assessee under sections 77 and 78 are hereby dropped. Impugned order is modified to above effect and matter is remanded to original adjudicating authority to quantify payment of service tax for period of 1st May, 2006 to 31st May, 2007 along with interest.

Relevant

Nair Coal Services Ltd. Vs. CCE Nagpur dated 27.7.2016 cited as MANU/CM/0722/2016
: 2016 (45) STR 529 (Tri. Mumbai)

Tags : Demand Levy Penalty

Share :