By TIOL News Service

NEW DELHI, JULY 28, 2017: THE appellant is a Government company.

The main activity of the appellant is to develop tourism and infrastructure activities in the State of Rajasthan. They have introduced railway transport by the name & style of "Palace on Wheels" and "Royal Rajasthan on Wheels", to develop the tourism in Rajasthan for people coming from abroad and outside State.

They have entered into an agreement with various emporia/shops that come during the course of the journey on the said two trains, for stopping the trains before the said shops to facilitate the passengers to do shopping, etc.

The appellant charges a "facilitation fee" for the said purpose.

Revenue entertained a view that this "facilitation fee" is commission from various shops and emporia for providing services of promoting or marketing or selling of goods provided or belonging to the emporia/shops and is liable to Service Tax under the category of "Business Auxiliary Service?.

The ST demand was confirmed by the CCE, Jaipur and, therefore, the appellant is before the CESTAT.

Both sides justified their claims.

The CESTAT adverted to the definition of "Business Auxiliary Services" and observed -

"9. The scope of definition as above is very wide and it covers all activities which promote business of the clients. In terms of agreement entered into by the appellant with the Customers, they undertake to stop the bus carrying the guests in front of the Emporia which have signed the agreement with the appellant. From this, it is evident that the basic objective of the agreement was to provide potential customers to the Emporia which were empanelled with the appellant even though there is no assurance that the guests will make purchases from the Emporium. It is clear that the appellant, by the act of stopping the buses only in front of contracted emporium and not in front of others, engaged in providing customers to the emporium resulting in promotion of sales. This is clearly in the nature of promoting the sales of goods belonging to the clients and facilitation fee received by the appellant from the emporium is nothing but in the nature of commission received for providing such services."

The activity of the appellant was, therefore, held to be rightly covered under "Business Auxiliary Service? and leviable to service tax.

However, the CESTAT observed that the appellant, being a State Government undertaking, cannot have any intention to deliberately evade payment of service tax and, therefore, the demand is to be restricted to the normal period only.

The matter was remanded to the adjudicating authority for re-computing the demand.

In passing: A bus stops, a train pulls into the station!

(See 2017-TIOL-2654-CESTAT-DEL)