By TIOL News Service

MUMBAI, JAN 22, 2016: THE appellants run Multiplexes throughout the country. They had made payment to foreign architects for service of concept design and interior decoration of their Multiplexes. They also received 'Pouring Fees' and 'Signing Fees' from M/s. Coca Cola India Pvt. Ltd. (CCIPL).

Proceedings initiated for recovery of Service tax culminated in the impugned order passed by the Commissioner of Service tax confirming tax of Rs. 48,55,624/- and Rs. 64,001/- under Business Auxiliary Services (BAS) in respect of 'Pouring Fees' and 'Signing Fees' and tax of Rs. 4,98,988/- for the period 1.1.2005 to 31.3.2006 in r/o Architect services. The amount deposited alongwith interest for the Architect services was appropriated. Interest and penalties also found their way into the order.

The appellant is before the CESTAT and submits as below -

+ Service Tax on import of services (Architect services) could be levied only from 18.4.2006 with the introduction of Section 66(A) of the FA, 1994 as held by the Bombay High Court in the case of Indian National Shipowners Association vs. Union of India - 2008-TIOL-633-HC-MUM-ST.

+ Each Multiplex theatre is duly registered within the jurisdiction of respective Service tax authorities. Out of 19 premises, only two fall within the jurisdiction of the Adjudicating authority. Therefore the demand in respect of 17 other premises is ultravires. [Kiran Singh vs. ChamanPaswan [1954 AIR 340] refers]. On this ground demand of Rs.38,39,984/- out of the total demand of Rs.49,19,625/- is beyond the jurisdiction of the Adjudicating authority.

+ Each activity performed by them under the scope of service for 'Signing fees' is taxable under different categories of services introduced in the Act from a period subsequent to the dispute as shown below:

- 500 minutes on-screen advertising time: sale of space or time 65(105) (zzzm) w.e.f. 01.05.2006.

- Non-Compete clause: Declared service w.e.f. 01.07.2012.

- Signage: Sale of space or time 65(105) (zzzm) w.e.f. 01.05.2006.

- Right to use Inox Logo: Brand promotion 65(105)(zzzzq) w.e.f. 1.7.2010

- Consideration for clause 5 activities is advertising & marketing fund which is not subject matter of dispute.

+ By onscreen advertisement and signage, the appellant is promoting their own goods and not that of any third party and, therefore, no service is rendered under BAS category.

+ Transaction is revenue neutral as service tax payable would be available to them as Cenvat Credit and hence no malafide can be attributed so as to invoke the extended time period.

The AR referred to the Agreement between CCIPL and the appellant and submitted that the services rendered by the appellant are squarely covered under Business Auxiliary Service as crystallized in the impugned order.

The Bench extracted the salient clauses of the agreement dated 18.02.2003 and observed -

Merits:

+ It is apparent that the appellant were providing services to CCIPL and received one time 'Signing fees' and 'Pouring fees' on annual basis from each of the properties i.e. Pune, Vadodara, Bangalore, Mumbai and Kolkata.

+ Only because the 'Pouring fee' from all properties/locations was included in the Balance Sheet of the appellant in a consolidated manner under the income Head i.e. food and beverages, the DGCEI issued the demand show cause notice answerable to Commissioner of Service Tax, Mumbai demanding service tax on the fees collected from each location.

+ It is not disputed that each of the locations had separate Service Tax registration. It is also not disputed that the services were provided by the appellant from a Multiplex in each location individually. Therefore, there is merit in the contention that the Commissioner of Service tax, Mumbai has no jurisdiction to adjudicate the case in respect of services received beyond jurisdiction.

+ The fact remains that, as admitted in the Order by the Commissioner, it was disclosed by the appellant's authorized representative Mr. Rajesh Parte vide his statement dated 27.4.07 that revenues coming from different locations were accounted as 'Pouring Fees' in the balance sheet.

+ The Commissioner held that appellant did not inform that discharge of service tax liability was left to each individual location and that they were not maintaining centralized accounting. In our view, the issue is not of centralized accounting. It is an obvious fact a company having pan India business locations would have a consolidated Balance sheet showing revenue from all locations. It was up to the department to ascertain whether the services were rendered in different locations with separate service tax registration or whether appellant had taken centralized registration. Nowhere in the proceedings, either in the investigation or in the show cause notice, has it come out that the appellant had taken centralized registration. In fact the Service Tax registration number itself shows that centralized registration was not taken. The Commissioner has erred in mixing the issue of centralized accounting and centralized registration.

+ The Commissioner of Service Tax is appointed under a notification which authorizes him to exercise powers under Service Tax within the jurisdiction of Mumbai. There is no notification which authorizes him to exercise powers in respect of cases originating outside his jurisdiction. Therefore, clearly the adjudication order has been passed beyond the jurisdiction of the Commissioner in respect services rendered outside Mumbai. In our view, it would have been appropriate for the Commissioner not to pass the Order in respect of services rendered outside Mumbai jurisdiction. The Commissioner should have refrained from adjudicating and instead could have initiated the process of making show cause notice answerable to the jurisdictional Commissioners or he should have written to the Central Board of Excise and Customs seeking power to adjudicate the case of services rendered pan India just as DGCEI has the power to issue the show cause notice on pan India basis.

The case law of Nokia (India) Pvt. Ltd. relied by the adjudicating authority was held as misplaced as the facts involved were different. Placing reliance on the decisions cited by the appellant, the Bench held that the demand of Rs.38,39,984/- was confirmed beyond the jurisdiction of the Commissioner and, was therefore, set aside as invalid .

As regards the leviability of service tax on the 'pouring fees' and 'signing fees' received by the appellant within Mumbai jurisdiction, the Bench adverted to the various clauses of the agreement and observed that the appellant granted CCIPL the promotional and advertising rights in respect of beverages in the multiplexes and to have prominent signage and which indicated that the appellant provided the Business Auxiliary Services under Section 65(105)(zzb) read with definition of Business Auxiliary Service under Section 65 (19) (i), by promoting sale of goods provided by the client. Elaborating further, the Bench noted that the contention that the appellant is promoting or marketing its own goods because it has purchased the beverages from CCIPL, does not hold good as the words used in the definition read “goods produced or provided by or belonging to the client”.The submission of the appellant that the services were classifiable under different categories and which made their appearance at a later date was not agreed to.

Nonetheless, the Bench agreed that service tax on import of 'Architect Services' attracts levy of service tax only from 18/4/2006 onward in view of the settled legal position.

Limitation & Penalty:

The plea of the demand being hit by limitation raised by the appellant was not agreed on the ground that it wasthe responsibility cast on the appellant to furnish details to the authorities at prescribed frequency u/r 7 of the STR and declare the services rendered, assess the tax due and make the payment of service tax by the due date. Inasmuch as since it was only in pursuance of investigation carried out by DGCEI that the non payment of service tax came to light, the demand invoking extended time period under Section 73 was sustainable, the CESTAT added. Equivalent penalty u/s 78 was also held payable.

Conclusion:

(a) Demand of service tax on 'pouring fees' and 'signing fees' is upheld to the extent of demand on services rendered within the jurisdiction of Service Tax, Commissioner Mumbai. The demand quantum is to be worked out and intimated by the Commissioner to the appellant within 15 days of the receipt of the Order.

(b) The demand in respect of such services rendered outside the jurisdiction of Mumbai is set aside.

(c) Demand on Architect fees is set aside.

(d) Appropriate interest under Section 75 of the FA, 1994 is payable.

(e) Appropriate penalties under Sections 76, 77 and 78 of the FA, 1994 are payable.

The Appeal was partly allowed.

(See 2016-TIOL-239-CESTAT-MUM)