M/s. Ours Aariya Bhavan vs Commissioner Of GST & Central Excise

Sulekha Beevi C.S., Member (J)

Brief facts are that as per the agreement entered by appellant with M/s. Indian Railways Touring and Catering Corporation (M/s. IRCTC) the appellant is providing the service of supply of bed rolls to the passengers of trains during their journey in Air Condition / First class compartments of trains running in different sectors. For such services provided by the appellant they collected service charges from M/s. IRCTC. It appeared that these services are classifiable under Business Auxiliary Service. Even though the appellant collected service charges they did not discharge the service tax liability for the period 2006-07 to the tune of Rs.87,212/-. Show Cause Notice was issued proposing to demand the tax amount under Section 73 (1) of Finance Act 1994 along with interest and also proposed to impose penalties. After due process of law, the adjudicating authority confirmed the demand along with interest and imposed penalties. On appeal, the Commissioner (Appeals) upheld the same. Hence this appeal.

The Ld. Counsel Shri S. Sathiyanarayanan appeared and argued for the appellant. The Show Cause Notice dated 9/6/2011 was adverted to by the Ld. counsel to argue that though Show Cause Notice has been issued presumably invoking the extended period of limitation, there is no averment in the Show Cause Notice that the appellant has ‘suppressed facts with intend to evade payment of service tax’. So also the proviso to section 73 (1) has not been invoked in the Show Cause Notice. For this reason itself the demand, interest and the penalties imposed cannot sustain as the period involved is from 2006-07 and 2007-08. It is argued by the Ld. Counsel that it is not a mere omission to mention the particular section invoking the extended period but also that there is no averment in the Show Cause Notice that the appellant has suppressed facts with intend to evade payment of service tax. The Show Cause Notice issued is therefore time barred and may be set aside.

On merits, the Ld. Counsel submitted that the department has demanded the amount under Business Auxiliary Service as defined in Section 65 (19) of Finance Act 1994. In the Show Cause Notice, Clause (vi) of Section 65 (19) has been invoked by the department. The said clause (vi) relates to ‘provision of service on behalf of the client’. The appellant is not rendering any service on behalf of the client. In fact, the appellant is providing bed rolls which are fresh and cleaned periodically to M/s. IRCTC. The activity will not fall under the clause (vi) invoked in the Show Cause Notice. For this reason also the demand cannot sustain. The Ld. Counsel prayed that the appeal may be allowed.

The Ld. AR Shri Harindra Singh Pal appeared for the department. The argument of the Ld. Counsel that the proviso to Section 73 (1) has not been invoked in the Show Cause Notice was countered by the Ld. AR by adverting to the discussions in para 12 and 13 of the impugned order. It is submitted by the Ld. AR that mere omission to mention the section in the Show Cause Notice cannot be a ground to hold that the Show Cause Notice is invalid.

4.1. On merits, the Ld. AR submitted that the appellant had entered into an agreement with M/s. IRCTC for supply of bed rolls to the passengers during their train journey. They had to periodically clean the bed rolls and supply the same. For this reason the activity falls under the definition of Business Auxiliary Services and the demand is legal and proper. It is prayed that the appeal may be dismissed.

Heard both sides.

The foremost argument put forward by the Ld. Counsel is that the Show Cause Notice dated 9/6/2011 is issued for the period 2006- 7 and 2007-08 and is time barred. On perusal of the Show Cause Notice, we find that there is no averment that the notice is issued invoking the extended period. There is no whisper that the appellant has suppressed facts with intend to evade payment of tax. So also, the proviso to Section 73 (1) has not been mentioned or invoked in the Show Cause Notice. In such circumstances, Show Cause Notice which is not issued within the normal period cannot sustain. The notice issued is therefore in our opinion time barred.

On merits the Ld. Counsel has argued that the demand cannot fall under clause (vi) of the definition of the Business Auxilary Services. For better appreciation the definition is reproduced.

As per the definition of Business Auxillary services under section 65 (19) of the Finance Act 1994,

“Business Auxillary 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

(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

or

[Explanation For the removal of doubts, it is hereby declared that for the purpose 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;]

(vi) provision of service on behalf of the client; or

(vii) a service incidental or auxillary 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].

In para 4 of the Show Cause Notice it is alleged that the activity of providing bed rolls would fall under clause (vi) of the definition under Section 65 (19). The appellant is not providing any service on behalf of IRCTC. The appellant is providing service to M/s. IRCTC. There is no amount collected by the appellant from the passengers. In fact, the services are provided to M/s. IRCTC and amount is also collected from M/s. IRCTC. For this reason, the activity cannot be considered as a service provided on behalf of a client. On merits also the demand cannot sustain and requires to be set aside. The appellant succeeds on merits as well as on limitation.

From the forgoing, the impugned order is set aside. The appeal is allowed with consequential relief if any.