Whether electricity bill paid on behalf of client can be classified as ?Business Auxiliary Service??

PJ/Case Law/2020-2021/3650

Ninan Jacob Associates Vs Commissioner Of Central Tax & Central Excise (CESTAT Bangalore) Service Tax Appeal No. 25746 of 2013 Date of Judgement/Order: 29/05/2020
Brief Facts- The appellants are registered under Service Tax for provision of services of ‘Architect Service’ and ‘Works Contract’ service from 2003 and 2009, respectively. Disputing the classifications made by the appellant, Revenue issued a show-cause notice dated 20.4.2011 covering a period 2005-06 to 2009-2010 classifying the services under ‘Commercial Construction Service’, ‘Business Auxiliary Service’, ‘Renting of Immovable Property Service’ and ‘Architect Service’ and which were confirmed by the Order-in-Original No.31/2012-ST dated 10.12.2012.

Issue- Whether electricity bill paid on behalf of client can be classified as ‘Business Auxiliary Service’?

Appellant’s Contentions- The appellant submits that they have entered into various works contract and have registered with Sales Tax / VAT and has got registered as Works Contract Service provider only with effect from 1.6.2009, the composite contracts undertaken by him prior to this date need to be classified as ‘Commercial Construction Service’. He submits that the case is squarely covered by the decision of the apex court in the case of Larsen and Toubro: 2015 (39) STR 913 (SC). In view of the same, they have opted for composition scheme under Works Contract as upheld by the Tribunal in 2019 (31) GSTL 241 (Tri.-Hyd.).

Referring to the demand on ‘Renting of Immovable Property’ services, the appellant submit that they have discharged service tax on the same and have produced the proof thereof, before the adjudicating authority. He submits that going by the Delhi High Court judgment in the case of Home Solutions Retails (I) Ltd. 2011 (24) STR 129 (Del.). Tax is payable by them only after 23.9.2011 though the said decision is under challenge before Supreme Court.

Reasoning of Judgment- On going through the bills raised by ICICI Bank, HDFC Bank on the appellant, it is seen that the contracts awarded were for interior furnishing and made provisions for payment of reimbursable items. In view of the same, it is seen that the services rendered by the appellant are in the nature of Works Contract service, which could not be taxed before 1.6.2007 in view of the decision rendered in the case of Larsen & Toubro (supra). With effect from 1.6.2009, we find that the appellant is not taxable under ‘Works Contract Service’ before 1.6.2007 and the appellant had rightly opted for composition scheme thereafter. The nature of the service provided having not changed in-between, the department is not free to classify the service under different heads for different periods. We find that the demand on this count is not sustained.

The appellants have collected amounts from their clients for payment of statutory charges to Electricity Board, Municipal Corporation, etc., on behalf of the clients. Department has viewed this as ‘Business Auxiliary Service’. In view of the decision of the apex court in case of Intercontinental Consultants and Technocrats Pvt. Ltd.: 2018 (10) GSTL 401 (SC), we find that no service has been rendered by the appellant to the clients of the appellants in relation to promotion of business or marketing of the goods. Therefore, we hold that demand on this count is also not sustained.

As the Service Tax stands paid for Renting of Immovable Property’ services, we do not find any reason to sustain the demand.

Decision- All the demands raised, however, are not sustainable. In view of the above, the appeal is allowed.

Prepared By- CA Preksha Jain

Comments

PJ/Case Law/2020-2021/3650

Post a Comment

Query