B. Ravichandran, Technical Member
1. These three appeals are covering same service tax dispute and hence are taken up together for disposal. The appellant is registered with Service Tax Department for providing various taxable services and were engaged in managing and operating the hospitality and conference facilities at the premises of India Habitat Centre (IHC), New Delhi. The main dispute in these appeals is the liability of the appellant to pay service tax on the amount received from IHC towards expenses incurred for operation of the centre. The service tax liability was sought to be confirmed under the category of "Business Auxiliary Service". In addition, in one of the appeals, appellant's entitlement for abatement under notification no. 1/06-ST dated 1.3.2006, in respect of "Mandap Keeper Service" is also a matter of dispute. The appeals covered the period from 2005-06 to 2011-2012. The service tax demands of Rs. 3,44,45,613/- under "Business Auxiliary Service" and Rs. 99,60,802/-under "Mandap Keeper Service" were confirmed by the Adjudicating Authority in the impugned orders. Various penalties under Sections 76, 77 and 78 were also imposed.
2. Ld. Counsel for the appellant submitted that the appellant has wrongly availed cenvat credit of duty paid on inputs and input services and availed the abatement under notification no. 1/06-ST simultaneously. As such, they have reversed the whole disputed cenvat credit of Rs. 35,79,014/- along with interest of Rs. 35,19,674/ on 20.09.2013. In view of the total reversal with interest of the credit availed, their claim for abatement under Notification no. 1/06-ST cannot be denied. Reliance was placed on the decision of the Hon'ble Supreme Court in Chandarpur Magnet Wires) (P.) Ltd. v. Collector of Central Excuse, 1996 (81) ELT 3 and the decision of the larger bench of the Tribunal in Franco Italian Co. (P.) Ltd. v. CCE, 2000 taxmann.com 360 (CEGAT - New Delhi). It was also submitted that though the reversal of full cenvat credit was done after adjudication, their entitlement for abatement cannot be denied. Reliance for this was placed on the decision of the Allahabad High Court in Hello Minerals Water (P.) Lid. v. Union of India, 2004 (174) ELT 422. In the said case, the Hon'ble Allahabad High Court allowed the concession under t he notification considering the reversal of credit on the input done at the Tribunal's stage.
3. On the main dispute, involved in all the three appeals, with reference to appellant's tax liability under BAS, Id. Counsel submitted as below:-"
"(a) The appellant does not render any service to IHC under the agreement dated 2.8.1997. The agreement is for combined management of the facilities available with IHC with the expertise of the appellant. The gross consideration received was shared on a set proportion between the appellant and IHC. IHC is merely reimbursing the expenses incurred by the appellant for managing the facilities.
(b) The appellant is not providing any service to IHC neither they have received any consideration towards such service. The transactions between IHC and the appellant are on a revenue sharing basis, principal to principal and there is no service element. Reference was made to specific clauses in the agreement.
(c) Activities undertaken by the appellant do not fall under the category of "BAS". The impugned order holding clause (i) and (vi) of Section 65(19) are applicable to the activities is erroneous and without factual support. There is no provision of service on behalf of the client. In terms of the agreement, the operation and management of the facilities, at the premises of IHC, is undertaken by the appellant. In such operation, the appellant received services and the goods as per the specifications in Annexure-II to the agreement. Such expenses incurred were re-imbursed by IHC upto a specified limit of 10% of gross amount received. Over and above the said limit, the expenses are to be absorbed by the appellant.
(d) The demands raised against the appellant for extended period is not sustainable. The activities undertaken by the appellant and all the relevant facts were within the knowledge of the Department. The impugned agreement dated 2.8.1997 was already provided to the department as early as in 2008 itself as can be seen from their letter dated 21.02.2008. Similarly, there were earlier proceedings against the appellant for denial of benefit under notification no. 1/06-ST on the same grounds for the year 2008. The present proceedings were for the period earlier to that. As such, repeat proceedings invoking extended period of limitation is not sustainable. Reliance was placed on the decision of the Hon'ble Supreme Court in Nizam Sugar Factory v. Collector of Central Excise, 2006 (197) KLT 465."
4. Ld. AR contested the submissions of the appellant. He submitted that the appellants are managing and maintaining the various facilities at the premises of IHC. The terms of the contract indicate that they have to maintain the hospitality facility, promotion, publicity, advertisement, janitorial, cleaning services, security and valet services etc. This responsibility of the appellant has been clearly mentioned in the agreement dated 2.8.1997. As such, the services are correctly taxable under "BAS". Regarding the denial of exemption under notification no. 1/06-ST, it is submitted that during the material time, the appellants availed cenvat credit on inputs and services and as such, they are barred from claiming the said exemption.
5. We have heard both the sides and perused the appeal records including the written submissions filed in this regard.
6. First, we take up the matter regarding appellant's liability for service tax under "BAS". The show cause notice alleged that the appellants are providing Customer Care Services (inclusive of pantry, maintenance, security, housekeeping, hospitality, etc.) to the occupants of the premises on behalf of their client, IHC, on consideration as per agreement. It is necessary to examine the nature and scope of the agreement dated 2.8.1997 entered into by the appellant with IHC. The agreement stipulates that IHC engages the appellant to manage, maintain and operate the facilities listed thereto, which belong to IHC or facilities to be created by the appellant. It is stipulated that all assets comprised in the facilities shall always be the properties of IHC. The responsibilities of each party to the agreement have been elaborately listed in the said agreement. The appellant's responsibilities are listed in Article V. The)' shall be responsible for efficient management and operation of the said facilities to high standards. They shall provide internal maintenance, janitorial, security services, guest house facilities, convention centre and conference facilities, restaurants, etc. They shall, at their own cost and expenses, provide adequate staff to discharge the obligations. IHC's responsibilities are listed in Article VI. They are to provide initial par stock as per the list attached. IHC shall provide all fixtures and furnishers. A committee with representatives from appellant will decide on the tariff, quality control, etc. for the facilities. IHC shall also obtain and manage at their cost all the requisite licenses and permission for operating the facilities in the premises. They also provided external maintenance, common area maintenance, replacement of capital equipments, fire fighting, telephone, payment of property tax, etc. The important part of the agreement to be examined with reference to the present dispute is Articles XI, XIII read with Annexure II and related clauses. The Gross Operating Receipt (GOR) obtained from the facilities are to be shared between the contracting parties viz the appellant and IHC, in a fixed percentage. Different percentages were fixed for different type of facilities and also for initial period and latter continuing period. It is to be noted here that the present service tax liability is not relating to GOR, a fixed percentage out of which is received by the appellant. The service tax liability under the category of "BAS" is on certain expenses incurred by the appellant and which are reimbursed by IHC as part of the above said agreement. Annexure-II to the said agreement lists out expenses to be reimbursed by IHC subject to a ceiling of 10% of GOR. These are relating to repair, maintenance, credit card service, security, valet service, marketing promotional and business development expenses, etc. Revenue's contention is that these services are provided by the appellant to various customers and accordingly, they are rendering service of BAS to IHC. We have noted that these expenses are obligated in terms of the agreement and are fully reimbursed by IHC on actual basis upto a ceiling of 10% of GOR. From the overall arrangement as seen from the agreement, both IHC and the appellant together are involved in providing various facilities available in the premises of IHC. The responsibility of each of the parties in the overall business is clearly mentioned in the agreement. The consideration each one will get for their responsibility is also listed and agreed upon, in such arrangement one of the responsibilities of IHC is to arrange all these services like cleaning, security, business promotion, etc. These services in fact were provided by various contracting parties to whom the appellants were paying the consideration and getting the amount reimbursed from IHC. This much is clear from the terms of the agreement and has not been disputed by contrary evidences by the Revenue.
7. We note that the impugned order, very briefly, discussed the service tax liability of the appellant under the category of "BAS". It is recorded in the order that these expenses were fully reimbursed by IHC. The impugned order simply records that the plea that appellant did not make any profit in this arrangement does not take away the tax liability. It was recorded that the appellant provided combination of different services and their services are to be categorized under clauses (i) and (vi) of "BAS". The first category deals with promotion or marketing or sale of goods produced or provided by or belonging to the client. In this particular case, no such goods have been identified, which belonged to IHC and the marketing of the same has been done by the appellant. Regarding Clause (vi), provisions of Service on behalf of the client, it is seen that as per the agreement both IHC and the appellants were jointly engaged in running the activities at IHC. It is not brought out in the impugned order under which terms of the agreement the appellant can be categorized for providing services on behalf of the IHC. We could not find any such arrangement in the terms of the contract. In the overall scope of the contract, certain obligations were given to the appellants for which they are receiving a percentage of GOR. One of the obligations is to manage security, cleaning, promotional services. These are provided by various contracts parties with the appellant and the expenses incurred by the appellants were fully reimbursed without any mark up. There is an upper ceiling of 10% of GOR for such reimbursement. We have also perused reconciliation of reimbursed amount received by the appellant during the material time. We have also perused the various bills submitted by the appellant to support their claim that these expenses were incurred by them on behalf of the other contracting parties, IHC and are fully reimbursed in terms of the agreement.
8. It is clear from the terms of the agreement that IHC and the appellants have undertaken the business activities together and shared the revenue in a fixed proportion. The obligation of each party has been listed out. The dealings are more like co-venture agreement with joint purpose and shared income. This is also emphasized by forming of committee for tariff and quality in which both the contracting parties are representatives. The appellants are providing working capital, staff and management skills to run the facilities. IHC owned the facilities and obtained necessary approvals, licenses, etc. Thus, the pooled resources for a mutual benefit, generated income, which was shared on percentage basis. While discharging one of the responsibilities the appellants reimbursed the expenses on actual basis. We find such arrangement is not liable to service tax under BAS. The overall scope of the agreement indicates that it is not for rendering of service by one to another. Rather a common pool of resources required for running and maintaining the facilities of IHC successfully was attempted in terms of the agreement and the gross revenue is also shared showing the common intent. For such situation, we do not find a service provider service recipient relationship liable to service tax.
9. Looking at it in another angle, it can be seen that even if there is promotion of business of facilities of IIIC, as already noted, the increased income is always shared by both the parties. In such situation, it w
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ill involve self service also. Admittedly, any promotion or marketing of IHC facilities will directly benefit the appellant as GOR is shared. 10. Regarding the eligibility of the appellant for abated service tax liability for Mandap Keeper service in terms of the Notification no. 1/06-ST, admittedly, the appellant availed cenvat credit during the material time. However, we note that, the appellants have reversed the whole of the cenvat credit availed during the material time along with applicable interest. We also note that the cenvat credit availed was recorded in the original order but at that time, reversal was not made by the appellant. They have made the reversal of availed credit along with applicable interest on 20.09.2013. Following the ratio of the Hon'ble Supreme Court in Chandarpur Magnet (supra) and Hon'ble Allahabad High Court in Hello Mineral Water Pvt. Ltd. (supra) and the Tribunal's decision in Franco Italian Co. Pvt. Ltd., we find that the appellant is eligible for abated rate of duty as they have reversed the cenvat credit availed during the material time, fully. As such, the bar on claiming on such exemption is no more applicable. Accordingly, we hold that the impugned order of denial of exemption is to be set aside. 11. Considering the above discussion and analysis, we find that the impugned orders are not legally sustainable. Accordingly, we set aside the same and allow the appeals.