Custom, Excise & Service Tax Tribunal
Innovative Incentive And Events Pvt Ltd vs Chandigarh-I on 12 September, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 60290 of 2013
[Arising out of Order-in-Original No. CHD-CEX-001-COM-20-2013 dated 08.08.2013
passed by the Commissioner of CE & ST, Chandigarh-I]
Innovative Incentive And Events Pvt Ltd ......Appellant
SCO 171-172, 2nd Floor, Sector 8-C,
Chandigarh 160009
VERSUS
Commissioner of Central Excise, Central ......Respondent
Goods and Service Tax, Chandigarh Central Revenue Building, Plot No. 19, Sector 17-C, Chandigarh 160017 APPEARANCE:
Ms. Krati Singh with Ms. Shreya Khunteta and Ms. Samiksha Uniyal, Advocates for the Appellant Sh. Narinder Singh with Sh. Harish Kapoor, Authorized Representatives for the Respondent CORAM:
HON'BLE Sh. S. S. GARG, MEMBER (JUDICIAL) HON'BLE Sh. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. 60523/2024 DATE OF HEARING: 14.05.2024 DATE OF DECISION: 12.09.2024 PER : S. S. GARG The present appeal is directed against the impugned order dated 08.08.2013 passed by the Commissioner of Central Excise & Service Tax, Chandigarh-I, whereby the learned Commissioner confirmed the demand of service tax of Rs.93,44,332/- u/s 73(1) of the Finance Act, 1994 along with interest u/s 75 ibid and also imposed equal penalty u/s 78 ibid.
2 ST/60290/2013
2. Briefly stated facts of the present case are that the Appellant is engaged in multi-level sales promotion activities and has entered into contracts with various corporate clients whereby it sold vouchers in the form of gift, free holiday and free airline ticket to corporate clients against a consideration. The corporate clients provided these vouchers free of cost to its customers who purchase the goods under various schemes and offers from them. The customers redeem vouchers by directly approaching the Appellant as per terms and conditions of the vouchers. In respect of certain vouchers, the customers also make the payment to the Appellant for confirmation of bookings. As per the agreement between the Appellant and its corporate clients, the Appellant is bound to honour all the requests received from the customers and the Appellant is solely and exclusively liable to provide all the benefits or services to its customers as specified in vouchers. The Appellant has been discharging service tax liability under the head ‗Tour Operator' on the consideration received from the corporate clients for sale of vouchers after availing abatement under Notification No. 1/2006-ST dt. 01.03.2006 amended vide Notification No. 38/2007-ST dt. 23.08.2007. Audit of the Appellant's record was conducted by the department and thereafter, the show cause notice dt. 13.04.2011 was issued to the Appellant proposing the demand of service tax amounting to Rs.93,44,332/- along with applicable interest and penalty after invoking extended period of limitation. In the show cause notice, it was alleged by the department that the services provided by the Appellant fall under the category of ‗Business 3 ST/60290/2013 Auxiliary Service' under Section 65(19) read with Section 65(105)(zzb) of the Act and do not fall in the category of ‗Tour Operator Service' as the Appellant was providing these services to the customers on behalf of the corporate clients. After following the due process, the learned Adjudicating Authority vide the impugned order confirmed the demand proposed in the show cause notice along with interest u/s 75 of the Finance Act, 1994 and also imposed penalty u/s 78 ibid. Hence, the present appeal.
3. Heard both the parties and perused the material on record. 4.1 The learned Counsel appearing for the Appellant submits that the impugned order is not sustainable in law and is liable to set aside as the same has been passed without appreciating the facts and the law.
4.2 She further submits that in the impugned order, the demand of serviced tax has been confirmed under the head ‗Business Auxiliary Service' for providing vouchers to the customers of the corporate clients on their behalf under Section 65(19)(vi) of the Act i.e. provision of services on behalf of the client. She further submits that for qualifying under the said clause as claimed by the department, the service provider should render the services to third party which would ordinarily be rendered by the client i.e. the service provider steps into the shoes of the client; whereas, in the present case, the corporate clients are engaged in manufacture, sale and trading of goods and not engaged in providing ‗Tour Operator Service' i.e. in the business of planning, scheduling, organizing or arranging tours, 4 ST/60290/2013 therefore, the Appellant cannot be said to be providing ‗Tour Operator Service' on behalf of the corporate clients when the corporate clients itself are not Tour Operators.
4.3 She further submits that a fresh contract is entered into between the Appellant and the customers of corporate clients as per the terms and conditions of vouchers. The Appellant directly provides the tour operator services to the clients. Thus, there is absence of principal-agent relationship between the Appellant and its corporate clients.
4.4 She further submits that when there is complete absence of principal-agent relationship between the Appellant and its corporate clients, then the Appellant is not liable to pay service tax under the head ‗Business Auxiliary Service' in terms of Section 65(19)(vi) of the Act as the Appellant did not provide services in capacity of an agent. In this regard, she relies on following case-laws:
M/s Technoy Motors vs. CCE & ST, Jaipur-II [Final Order No. 58778- 58779/2017 dated 8.11.2017 (Tri.- Del.)] Infinium Motors Gujarat Pvt. Ltd. vs. CST, Ahmedabad [Final Order No. 11179/2022 dated 30.9.2022 (Tri.-Ahm.)] 4.5 She also submits that the Appellant is correctly discharging its liability under the head ‗Tour Operator' as per Section 65(115) of the Act for providing free holidays/air tickets and accommodation services to the customers. The customers availed the benefits of vouchers after accepting terms and conditions. Thereafter, the 5 ST/60290/2013 Appellant directly provided the services to customers without any intervention of corporate clients. Therefore, the Appellant is not rendering services to corporate clients under the head ‗Business Auxiliary Service' and is correctly discharging the service tax under the head 'Tour Operator' for providing services directly to the customers.
4.6 She further submits that the Appellant has correctly availed the abatement under Notification No. 1/2006-ST dt. 01.03.2006 amended vide Notification No. 38/2007-ST dt. 23.08.2007 while discharging the service tax liability.
4.7 She further submits that in the instant case, the Appellant received certain amount from the customers for booking accommodation as per the terms of voucher which was utilized towards booking accommodation. The Appellant also received the consideration from the corporate clients against vouchers for providing holiday package and booking airline tickets for the customers. Since, the Appellant qualifies to be the ‗Tour Operator', therefore, is eligible to avail the abatement for providing the services as per the above mentioned notifications. In this regard, she relies on the following case-laws:
M/s Make My Trip (India) Pvt. Ltd., Shri M.K. Pallai, Vice President (Finance) and Shri Mohit Kabra, Group CFO & Director M/s Makemy Trip (India) Pvt. Ltd. vs. Additional Director General, Directorate General of GST Intelligence, New Delhi [Final Order No. 50025-50027/2024 dated 10.1.2024 (Tri.-Del.)] Circular No. F. No. B. 43/10/97-TRU dated 22.8.1997 6 ST/60290/2013 4.8 She also submits that in the impugned order, the demand is confirmed on the provision of services to the corporate clients under the head ‗Business Auxiliary Service'. However, the subject matter of the transaction between the Appellant and the corporate clients or the Appellant and the customers of corporate clients are vouchers.
She further submits that the voucher is neither a goods nor a service and it is a mere instrument which grants the holder i.e. customers a right to seek redemption by way of goods or services from the Appellant on fulfilling terms and conditions of the voucher. The value of vouchers normally be included in minimum retail price of goods supplied by the corporate clients to the customers which would have been subjected to relevant tax at the point of sale. Hence, the transaction between the corporate clients and the Appellant does not attract service tax. In this regard, she relies on the decision of Hon'ble Karnataka High Court in the case of M/s Premier Sales Promotion Pvt. Ltd. vs. Union of India and Ors. [2023 (70) G.ST.L. 345 (Kar.)] where vouchers are held to be neither good nor services.
4.9 She further submits that that the department has not considered the tax and interest amounting to Rs.15,355/- already paid by the Appellant. Also, the Appellant had clarified that the difference of Rs.79,08,539/- in ST-3 returns and the balance sheet of the Appellant is reflecting as the department did not consider the benefit of abatement that the Appellant was entitled to receive on account of booking accommodation. Further, she also submits that cum-tax benefit is also available to the Appellant.
7 ST/60290/2013 4.10 She further submits that the entire demand is barred by limitation because the impugned demand pertains to period 2005- 2006 to 2007-2008 whereas the show cause notice was issued on 13.04.2011 by invoking the extended period of limitation. She submits that the extended period of limitation cannot be invoked as there was no wilful suppression or mis-representation of any fact in relation to payment of service tax. The Appellant was subjected to audit, however, investigation was not initiated pursuant to the objections raised in the audit report and the department directly issued the show cause notice which is a mere reproduction of the audit report. Moreover, in the instant case, the interpretation of complex provisions of service tax is involved and hence, invocation of extended period of limitation is bad in law. For this submission, she relies on the following decisions:
Mahanagar Telephone Nigam Ltd. vs. Union of India and Ors., 2023-TIOL- 407-HC-DEL-ST Commissioner vs. M/s. Reliance Industries Ltd. - 2023-TIOL-94-SC-CX Hyundai Motor India Pvt. Ltd. vs. Commissioner of Central Excise and Service Tax, LTU, Chennai - 2019 (29) G.S.T.L. 452 (Tri. Chennai) [Affirmed by Supreme Court in 2020 (32) GSTL J154 (Supreme Court)] Principal Commissioner of CGST, Delhi North vs. M/s.
Oriental Insurance Company Ltd [Final Order Nos.
55567-55568/2024 dated 18.4.2024 in ST/50020/2018 (CESTAT New Delhi)] Delhi Airport Metro Express Pvt. Ltd. vs. Commissioner of Central Excise & Customs [Final Order No. 50031/2024 dated 11.1.2024 (CESTAT New Delhi)] 8 ST/60290/2013 4.11 She also submits that the Appellant has been regularly filing ST-3 returns wherein the abatement availed by the Appellant is duly declared and the department was aware about the Appellant's activities. Hence, the extended period of limitation cannot be invoked. In this regard, she relies on the following case-laws:
Scaria Thomas & Co. vs. Commissioner of Central Excise & Service Tax, Vapi [Final Order No. 11895/2023 dated 11.9.2023 (Tri.-Ahm.)] Commissioner of Customs, Central Excise & Service Tax, Noida vs. M/s Zep Infratech Ltd. - 2019-TIOL- 881-CESTAT-ALL 4.12 As regards imposition of interest and penalty, she submits that when the demand of service tax itself is not sustainable, therefore, the question of interest and penalties does not arise.
5. On the other hand, the learned Authorized Representative for the department has filed the written submissions and reiterates the findings of the impugned order. He submits that the learned Commissioner after considering the services rendered by the Appellant has come to the conclusion that the Appellant has wrongly classified its services as ‗Tour Operator Service' instead of ‗Business Auxiliary Service'. The stand of the department is that the activities of the Appellant do not fall within the definition of ‗Tour Operator Service' as provided under Section 65(115) of the Finance Act, 1994.
He further submits that the Appellant is actually providing ‗Business Auxiliary Service' to the corporate clients because the Appellant is 9 ST/60290/2013 rendering the services on behalf of the corporate clients and therefore, the consideration received from the corporate clients is liable to be taxed under the head ‗Business Auxiliary Service' without the benefit of abatement. He also justifies the invocation of extended period of limitation on the ground that the Appellant never brought on record anything that it is providing the services on behalf of the corporate clients and thus, short payment of duty remained unearthed, if the audit had not detected the evasion of duty.
6. We have considered the submissions made by both the parties and perused of the material on record. We find that the only dispute in the present case is whether the Appellant is providing ‗Tour Operator Service' as provided under Section 65(115) of the Act or ‗Business Auxiliary Service' as provided under Section 65(19) read with Section 65(105)(zzb) of the Act? Before we proceed to decide this question, it will be appropriated to reproduce the definitions of ‗Tour Operator Service' as well as ‗Business Auxiliary Service', which are reproduced herein below:
―Tour Operator" :
Section 65(115) : ―tour operator‖ means any person engaged in the business of planning, scheduling, organising or arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours in a tourist vehicle or a contract carriage by whatever name called, covered by a permit, other than a stage carriage permit, granted under the Motor Vehicles Act, 1988 (59 of 1988) or the rules made thereunder. Explanation.--For the purposes of this clause, the expression ―tour‖ does not include a journey organised or arranged for use by an educational body, other than a commercial training or coaching 10 ST/60290/2013 centre, imparting skill or knowledge or lessons on any subject or field.‖ ―Business Auxiliary Service" :
Section 65(19) : ―Business Auxiliary Service‖ means any service in relation to, --
(i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or
(ii) promotion or marketing of service provided by the client; or [Explanation - For the removal of doubts, it is hereby declared that for the purposes of this sub-
clause, ―service in relation to promotion or marketing of service provided by the client‖ includes any service provided in relation to promotion or marketing of games of change, organised, conducted or promoted by the client, in whatever form or by whatever name called, whether or not conducted online, including lottery, lotto-bingo]
(iii) any customer care service provided on behalf of the client; or
(iv) procurement of goods or services, which are inputs for the client; or [Explanation -- For the removal of doubts, it is hereby declared that for the purposes of this sub- clause, ―inputs‖ means all goods or services intended for use by the client;]
(v) production or processing of goods for, or on behalf of the client; or
(vi) provision of service on behalf of the client; or
(vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, but does not include any activity that amounts to ―manufacture‖ of excisable goods.
Section 65(105) "taxable service" means any [service provided or to be provided (zzb) - to a client, by [any person] in relation to business auxiliary service‖ 11 ST/60290/2013
7. Further, we find that in the present case, the Appellant has entered into contracts with various corporate clients whereby it sold vouchers in the form of gift, free holiday and free airline ticket to corporate clients against a consideration and on that consideration, it is discharging the service tax liability under the head ‗Tour Operator' after availing abatement under Notification No. 1/2006-ST dt. 01.03.2006 amended vide Notification No. 38/2007-ST dt. 23.08.2007. We have perused the agreement between the Appellant and its corporate clients and it is clearly provided in clause 6 of the said agreement that the relationship between the parties is on principal-to-principal basis. The said clause 6 is reproduced herein below:
―6. RELATIONSHIP OF PARTIES - This agreement is on a principal-to-principal basis and does not create any principal-agent relationship. Nothing contained herein shall be deemed to create any association partnership, joint venture or relationship of principal and agent or master and servant or employer and employee between the parties hereto or any affiliates or subsidiaries thereof or to provide either party with the right, power or authority, whether express or implied to create any such duty or obligation on behalf of the other party.‖
8. Further, we find that in the impugned order, the demand has been confirmed under the head ‗Business Auxiliary Service' for providing vouchers to the customers of corporate clients on their behalf, but according to us, for complying under the said clause, the service provider should render the services to the third party which 12 ST/60290/2013 would ordinarily be rendered by the client i.e. the service provider steps into the shoes of the client; whereas, in the instant case, the corporate clients are engaged in manufacture, sale and trading of goods and not engaged in providing ‗Tour Operator Service' i.e. in the business of planning, scheduling, organizing or arranging tours, therefore, it cannot be said that the Appellant is providing ‗Tour Operator Service' on behalf of the corporate clients when the corporate clients itself are not Tour Operators.
9. Further, we also find that a fresh contract is entered into between the Appellant and the customers of corporate clients as per the terms and conditions of vouchers and the Appellant directly provides the tour operator services to the clients and there is absence of principal-agent relationship between the Appellant and its corporate clients. We also find that there is no agreement between the Appellant and its corporate clients which provides that the services are to be provided on behalf of the corporate clients because the Appellant was solely responsible for providing the promised services to the customers and it had to bear all the related risks and losses. The corporate clients were immune from all costs, actions, claims, suits, proceeding etc and hence, the corporate clients were not responsible for the services provided by the Appellant to the customers. Further, the customers of corporate clients are not bound to avail the benefits under vouchers by virtue of the agreement between the Appellant and the corporate clients. Consensus-ad-idem is required between the Appellant and the customers. The Appellant also received certain amount from customers directly apart from 13 ST/60290/2013 receipts from the corporate clients on account of booking holiday package. Therefore, we hold that the Appellant directly provided the services to the customers without any intervention of the corporate clients and the Appellant is rendering the services under the head of ‗Tour Operator' and has correctly availed the abatement under the Notification No. 1/2006-ST dt. 01.03.2006 amended vide 38/2007-ST dt. 23.08.2007 after fulfilling the conditions as prescribed in these notifications.
10. As regards the invocation of extended period of limitation is concerned, we find that the demand of service tax pertains to period 2005-2006 and 2007-2008 whereas the show cause notice was issued on 13.04.2011 only on the basis of audit conducted on 30.03.2009, 31.03.2009, 01.04.2009 and 02.04.2009. The show cause notice invoking extended period of limitation has been issued solely on the basis of audit report without further investigation into the matter. It has been consistently held by the Courts that for invoking the extended period of limitation, intention to evade tax should be established, whereas in the present case, the Appellant has been regularly filing ST-3 returns wherein the abatement availed by the Appellant is duly declared and the department was well aware about the Appellant's activities; therefore, extended period of limitation cannot be invoked. 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/paid or has been short levied/short paid or erroneously refunded by reason of fraud or collusion or wilful ms-statement or suppression of facts or 14 ST/60290/2013 contravention of any provisions of the Act or the Rules made thereunder with an intent to evade payment of service tax. However, in the present case, the impugned show cause notice does not contain any allegation of fraud, collusion or wilful mis-statement on the part of the Appellant. The impugned show cause notice only alleges that the extended period of limitation is applicable as the Appellant had suppressed the material facts and had contravened the provisions of the Act with intent to evade service tax. We find that in the case of Cosmic Dye Chemical vs. Collector of Central Excise, Bombay - 1995 6 SCC 177, the Hon'ble Supreme Court, in the context of proviso to Section 11A of the Central Excise and Salt Act, 1944 which is similarly worded as the proviso to Section 73(1) of the Act, has held that ―it is, therefore, not correct to say that there can be a suppression or mis-statement of fact which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Mis-statement or suppression of fact must be wilful.‖ Further, in the case of Uniworth Textiles Limited vs. Commissioner of Central Excise, Raipur - (2013) 9 SCC 753, the Hon'ble Supreme Court, referring to its earlier decision in Cosmic Dye Chemical (supra), has held that :
―55. Though it was sought to be contended that Section 28 of the Customs Act is in pari materia with Section 11A of the Excise Act, we find there is one material difference in the language of the two provisions and that is the words "with intent to evade payment of duty‖ occurring in proviso to Section 11A of the Excise Act which are missing in Section 28(1) of the Customs Act and the proviso in particular........
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56. The proviso to Section 28 can inter alia be invoked when any duty has not been levied or has been short-levied by reason of collusion or any wilful misstatement or suppression of facts by the importer or the exporter, his agent or employee. Even if both the expressions "misstatement" and "suppression of facts" are to be qualified by the word "wilful", as was done in the Cosmic Dye Chemical case while construing the proviso to Section 11A, the making of such a wilful misstatement or suppression of facts would attract the provisions of Section 28 of the Customs Act. In each of these appeals it will have to be seen in a fact whether there has been a non-levy or short-levy and whether that has been by reason of collusion or any wilful misstatement or suppression of facts by the importer or his agent or employee."
Further, in the case of Bharat Hotels vs. Commissioner of Central Excise (Adjudication) -2017 SCC Online Del 12813, the Hon'ble Delhi High Court has observed that:
―26. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word "suppression" in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. "fraud, collusion, willful misstatement. As explained in Uniworth case (supra), "misstatement or suppression of facts" does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid paying excise duty. The terms "mis- statement"
and "suppression of facts" are preceded by the expression "willful" The meaning which has to be ascribed is, deliberate action (or omission) and the presence of an intention. Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention."
16 ST/60290/2013 In view of the law laid down by the various Courts on the aspect of limitation, we are of the opinion that in the present case, invocation of extended period is bad in law.
11. The question of interest and penalty does not arise because the demand of service tax itself is not sustainable as discussed above.
12. Keeping in view our discussion above, on merit as well as on limitation, we are of the considered view that the impugned order is not sustainable in law and is liable to be set aside and we do so by allowing the appeal of the appellant with consequential relief, if any, as per law.
(Order pronounced in the court on 12.09.2024) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) RA_Saifi