CESTAT, Mumbai Bench
Shoppers Stop Ltd. vs. Commissioner of Service Tax, Mumbai-II
Section 65(104c), 73
Period 1-5-2006 to 31-5-2007
Ramesh Nair, Judicial Member
Raju, Technical Member
Order No. A/89369/17/Stb
Appeal No. St/401/12-Mum
September 4, 2017
ORDER
Ramesh Nair, Judicial Member – This appeal is directed against Order-in-Appeal No. 35/ST/SB/2011-12 dated 14.3.2012 passed by the Commissioner (TAR), Mumbai.
2. The brief facts of the case are that the appellant M/s. Shoppers Stop Ltd., Mumbai (for brevity ‘SSL’) are in the business of operating and running retail stores under the brand of ‘Shoppers Stop’ where goods of various brands, varieties, descriptions, etc. are sold. They grant concessions to various concessionaires who are the brand name owners of the goods so sold in the appellant’s stores. Those concessionaires are authorised by the appellant to display, demonstrate and sale of the products from the said retail stores operated by SSL. The consideration for the concession is received by the appellant as a percentage of the goods sold subject to a minimum guaranteed amount. For the said arrangement of concession, the appellant entered into a ‘Concession Agreement’ with the concessionaires. The case of the revenue is that under the concession agreement, the appellant provided various facility in relation to commerce to the concessionaire which fall under the category of ‘Business Support Service’ and towards the said service they receive consideration by way of percentage of sale of the concessionaire’s goods from their stores. On such consideration, the appellant is liable to pay the service tax. Accordingly a show cause notice dated 22.10.2009 was issued to the appellant for the period 01.05.2006 to 31.05.2007 demanding service tax of Rs. 3,44,45,034/- alongwith interest thereon and proposing penalties under the provisions of Finance Act, 1994. The show cause notice was culminated into an Adjudication Order, whereby the service rendered by the appellant to the concessionaires was held to be classified under ‘Business Support Service’ and consequently demand of service tax was confirmed alongwith interest and penalties were imposed. Being aggrieved of the impugned order, the appellant filed this appeal.
3. Shri S.S. Gupta, Ld. Chartered Accountant, appearing on behalf of the appellant made the following submissions:
3.1 The transaction entered between the appellant and the concessionaire is the purchase and sale of the goods and not of any provision of service. The appellant have also paid VAT on the entire amount of sale price realized from the ultimate customer. The Commissioner in the order observed that in the whole process of trading of goods, the appellant is acting as a cash collecting agent without bearing any responsibility or undertaking and activity. Therefore the services are taxable under the category of ‘Business Support Services’. This contention is not correct as mere acting as a collecting agent cannot be classified as ‘Business Support Services’. The appellant also relies upon the judgment in the case of M/s. Bharat Petroleum Corpn. Ltd. v. CST [Final order No. A/828-830/2014-WZB/C-1 (CSTB), dated 4-6-2014] and Gujarat Narmada Valley Fertilizer & Chemicals Ltd. v. CCE [Order No. A/11535/2014, dated 25-08-2014].
3.2Â The Commissioner’s finding is also based on the contention that from 1/6/07 appellant paid service tax on the same activity under the category of ‘Renting of Immovable Property’, therefore there is an element of service and it is not a transaction of trading of goods. The Commissioner also observed that VAT percentage is only 4% as against the service tax rate of 12% therefore it is beneficial for the appellant to pay VAT. This observation is not correct as merely by payment of service tax from 1/6/2007 considering the service as ‘Renting of immovable property’, the fact of transaction being in the nature of trading of goods will not change. Observation of 4% VAT rate is also incorrect as percentage is not fixed at 4% but the percentage on various products varies. In some of the product the VAT rate is 12.5% therefore the appellant have not been always benefitted.
3.3 The activities of the appellant do not fall under the category of ‘Business Support Services’ as per the definition given in Section 65 (104c) and as per the Board’s Circular dated 28/02/2006 wherein it was clarified that outsourced service are sought to be taxed under this category. In the present case, no part of the services has been outsourced by the concessionaire to the appellant. As per the explanation, it enlarges the scope and provides that the infrastructure support services, secretarial services, internet, telecom facilities, pantry and security services. The Commissioner incorrectly narrates that the facilities provided by the appellant on the submissions that—
| (a) | The appellant do not provide any reception with competent person to handle message |
| (b) | No internet facilities are provided to the concessionaire. The telephone facility is provided on payment basis. |
| (c) | The security service is provided in general, as the appellant owns the entire store. The security of mall as well as goods belonging to the appellant is provided. The agreement makes it clear that the concessionaire shall be wholly responsible for the safety and security of its products. The concessionaire may ensure the products for security. This substantiates that the appellants are not responsible for loss of any other property of the concessionaire. Hence security services are not provided by the appellant. |
| (d) | The show cause notice does not allege that the facility of lounge, secretarial services or pantry is provided by the appellant. |
| (e) | The order incorrectly concludes that the appellants are monitoring the quality of merchandise, range of products, sales staff, etc. The loyalty program, first citizen reward points, etc are carried out by the appellant in general for its own product as well as the product of the concessionaire. Hence no marketing support is provided by the appellant to the concessionaire. |
| (f) | The cash collection and billing support is provided as the sale is made by the appellant to the customers. |
| (g) | No office space is provided to the concessionaire but only shop is provided. The explanation given in the definition refers to office facilities. Shops can not be equated with the office. |
In view of the above points the appellant contended that the service is not taxable under the category of ‘Business Support Service’.
3.4 Ld. Chartered Accountant further submits that the appellant started paying service tax under the category of ‘Renting of immovable property’ w.e.f. 01/06/2007 which has been accepted by the department. The same service for the past period can not be classified under different category i.e. ‘Business Support Service’. When revenue accepted the same service under the category of ‘Renting of immovable property’ which was not taxable before 01/06/2007, tax can not be levied under new category. The appellant rely upon the judgments in the case of Board of Control for Cricket in India v. CST [2007] 9 STT 399 (Mum. – CESTAT) and NCR Corpn. India (P.) Ltd. v. CST [2008] 16 STT 173 (Bang.).
3.5Â Show cause notice for the period 01/05/2006 to 31/05/2007 was issued on 22/10/2009 by invoking the extended period. The appellant had a bonafide belief that the tax was not payable under the category of ‘Business Support Services’. Since the appellant in fact paid the service tax under the category of ‘Renting of immovable property’ w.e.f. 01/06/2007, this substantiates bonafide belief that service tax was not payable under the category of ‘Business Support Services’. The demand is also time barred.
In support of the above submissions, the appellant also relies upon the following judgments:
| (i) | Siddeshwari Cotton Mills (P.) Ltd. v. Union of India 1989 taxmann.com 634 (SC) | |
| (ii) | Srinivasa Transports v. CCE&ST [final order No. 20024 of 2014, dated 1-1-2014] | |
| (iii) | Fine Switchgears v. CCE [order No. ST/739/2011 (PB), dated 18-10-2011] | |
| (iv) | Twenty Twenty Media (P.) Ltd. v. CST [2012] 24 taxmann.com 97/36 STT 48 (Mag.) (New Delhi – CESTAT). |
4. On the other hand, Shri D. V. Nagvenkar, Ld. Additional Commissioner (AR) appearing on behalf of the revenue, reiterates the finding of the impugned order. He further submits that as per the concession agreement, the appellant granted right to display and sell the concessionaire’s product from the store of the appellant for which the appellant provides huge infrastructure support for commerce of the concessionaire. Therefore the service is clearly of ‘Business Support Service’ and not of renting of immovable property. The consideration of such service is either by way of a minimum guarantee amount or as a percentage of the value of the goods sold which clearly indicates that there is no renting of any space. Merely because the appellant paid service tax w.e.f. 01/06/2007 under the category of ‘Renting of immovable property, it can not be held that the classification of the service is settled. There was no occasion except in the present case to decide the legality of the classification in question. Accordingly in the present the adjudicating authority by following due process of law decided the classification of the service under the category of ‘Business Support Services’ which is correct and legal.
5. We have carefully considered the submissions made by both sides and perused the records.
6. The issue to be decided by us is that whether the service provided by the appellant to the concessionaire is classifiable as Business Support Service and liable for service tax during the relevant period or otherwise. The claim of the appellant is that they are engaged in trading of the goods. They contended that as per the agreement with the concessionaire they are purchasing goods from concessionaire and selling the same to the ultimate customers in their stores and the consideration is in the form of discount given by the concessionaire to the appellant which is a trading profit, hence not liable to service tax. It is the alternate submission of the appellant that from 01/06/2007 they are paying service tax on the same activity under the category of ‘Renting of immovable Porperty’ therefore the service tax on the service can not be demanded under different category i.e. ‘Business Support Service’. It is necessary to ascertain, what are the activities between the appellant and concessionaire that whether it is service, if yes, under which category. For this, the concession agreement is vital. For better understanding we reproduce below the relevant clauses of the said agreement between the appellant and one of the concessionaires i.e. M/s. Luxor Writing Instrument Pvt. Ltd.:
From reading of the various clauses of the agreement and it’s terms & conditions, it is observed that the appellant is maintaining complete business infrastructure under the brand name of ‘Shoppers Stop’ wherein the concessionaire was given right to display, promote and sale of their product. The concessionaire is only displaying and selling their product but the entire store, ambience, electricity, security, air conditioning etc. are provided by the appellant. The customer comes to the store not only by recognizing the product/brand sold in the store but mainly by recognizing the goodwill of the brand of the appellant i.e. ‘Shoppers Stop’ for which the concessionaire agrees to pay a consideration either in the form of percentage of sale or minimum guaranteed amount. It is also fact that the appellant does not make payment of so called sale of the goods by the concessionaire to the appellant immediately at the time of sale of the goods to the customer. The amount is retained for more than a month and thereafter the amount, after deduction of the appellant’s consideration, is paid to the concessionaire. The appellant have practically no role in the sale of the goods except making documents such as invoices. The concessionaire only display and sell the goods. Therefore the appellant’s receipt of consideration is only towards the facilities provided by the appellant to the concessionaire i.e. infrastructure, schemes, air-conditioned store, electricity, common security and most important is Shoppers Stop branded store. Therefore these activities/facilities provided by the appellant indeed provision of service. The appellant’s contention is that the consideration is of trading margin only but in our view the service charges for the facilities provided by the appellant given a colour of trading margin. When the activity is in the nature of service, though the manner of consideration is in different form, it will be treated as indirect consideration towards the said service.
6.2Â As regard the question whether service provided by the appellant falls under ‘Business Support Service’ or otherwise, we reproduce the definition of the ‘Business Support Service’ prevailing during the material time as under:
“Support Services of Business or Commerce” means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.
As per the plain reading of the definition, it can be seen that any service provided in relation to business or commerce is a ‘support service of business or commerce’. In the present case the concessionaire is solely engaged in the commerce i.e. sale of their goods in the premises of the appellant. The appellant provides their branded store duly air-conditioned, with adequate ambience, lighting, common security, various sales schemes to attract the customer. These facilities contribute in the sale of the goods of the concessionaire from the stores of the appellant. Therefore the service of the appellant clearly covered in the first clause of the definition of ‘support services of business or commerce’. The scope of this service is not limited but very wide. In our view any service which support the operation of business and commerce of the client covers under the business support services, if it is not specified under the specific classification.
6.3Â As regard consideration, from the concession agreement, it can be seen that the consideration is either in the form of percentage of sale or if the total amount, as per the percentage does not meet to the minimum guaranteed amount then irrespective of percentage the fixed minimum guaranteed amount is charged by the appellant from the concessionaire. This further establish that the arrangement is not of sale-purchase of goods between concessionaire and the appellant but of service.
6.4Â There is strong argument on behalf of the appellant on the point that if at all the activity of the appellant is considered as service, it is correctly classifiable as ‘Renting of immovable property service’ on the ground that appellant started paying service tax under the said head from 1-6-2007 and same was accepted by the Revenue. In this regard, we find that appellant suo moto classified the service under ‘Renting of immovable property service’ and started paying service tax, since there is no revenue impact, no dispute arose from either side. In the present case the question of classification was raised by the Revenue by issuing show cause notice, question has to be answered as per the prevailing statutory provisions, therefore merely because the appellant from 1-6-2007 classified the service under “Renting of immovable property service” and department has not raised any objection, cannot become a law to construe that service involved in the present case is of “Renting of immovable property service”. When the question was raised after examining facts and legal provision, the adjudicating authority held that service in the present case is correctly classifiable as Business Support Service and we uphold the same view taken by the Adjudicating authority. The decisions cited by the Ld. C.A. in case of M/s. Board of Control for Cricket in India and M/s. NCR Corporation India Limited (supra), we observed that both these orders are stay orders and not final orders therefore deciding the matter at final stage, stay order cannot be considered as in stay order prima facie view is taken for deciding pre-deposit and no final conclusion is drawn at the stay stage. As regard other decisions cited by the Ld. C.A., we have gone through all the judgments and found that in none of the case peculiar facts of the present case are involved, therefore ratio of those judgments cannot be applied to the facts of the present case. The appellant also raised the ground of limitation, we find that before 1-6-2007 appellant neither declared their service nor filed any ST- 3 returns declaring the service of Business Support Service, therefore department was completely kept in dark about the provision of service under the category of Business Support Service, therefore there is clear suppression of facts on the part of the appellant, extended period was correctly invoked. For the same reason penalties imposed are also legal and correct, which do not require any interference. As per our above discussion, we are of the considered view that appellant have provided the service of ‘Business Support Service’ which is taxable during the relevant period, therefore impugned order is upheld, appeal is dismissed.
