By TIOL News Service

NEW DELHI, MAY 02, 2017: THE appellant is Air Force Auditorium.

The Department alleged that service tax liability arises on empanelment fees recovered from the vendors as commission shown under the head "Rebate" under the category of Business Auxiliary Service (BAS).

The appellant is before the CESTAT and submits -

+ Empanelment fee is received as precautionary measure and to meet the requirement of safety and security while hiring out the auditorium and no services are provided by the appellant to the members or vendors.

+ As per the decision of Bombay High Court in CKP Mandal = 2006-TIOL-152-HC-MUM-ST, the activity of receiving donations towards granting certain contractor a monopoly right in their premises to undertake the work of catering and decoration for clients to whom the assessee rented out their premises for holding functions, is not of commission agent falling under definition of BAS.

+ The entire transaction is revenue neutral; vendor is paying empanelment fee out of the amount received from the service receipt and the service tax paid. Thus the entire exercise is revenue neutral. [ Dinesh M Kotian = 2016-TIOL-262-CESTAT-MUM refers]

+ No malafide on the part of the appellant, therefore, extended period of limitation cannot be invoked. [Indian Institute of Chemical Technology = 2009-TIOL-1512-CESTAT-BANG, Infinity Infotech Parks Ltd. = 2012-TIOL-987-HC-DEL-ST refers. ]

The Bench extracted the definitions of “BAS” and the related ‘taxable service' and observed -

+ It is a fact that for every event for which the appellant gives their auditorium on hire, they are collecting "empanelment fee" from the respective vendors. From the arrangement, it is evident that the business of "Vendors" gets promoted by the appellant for which they are collecting the said fee. The same would be covered by the definition of "BAS" as defined under Section 65(105) (zzb) read with Section 65(19) of the Finance Act, 1994 and, therefore, the amounts collected as "empanelment fee" would be chargeable to service tax under BAS.

+ However, there is no evidence available on record to state that the appellant suppressed the facts from the Department with the "intention to evade" the service tax on the empanelment fee collected by them. Therefore, the extended period in this regard cannot be invoked under Section 73(1) of the Finance Act, 1994. Consequently, the demand is confirmed only for the normal period.

Accordingly, the matter was remanded to the original adjudicating authority for the re-quantification of the demand. The submission of the appellant that the service tax paid by the caterer would be available as credit to the appellant, the merits thereof was to be also examined by the adjudicating authority.

The appeal was partly allowed and remanded in above terms.

(See 2017-TIOL-1457-CESTAT-DEL)