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BRIEF FACTS OF THE CASE -

M/s. Ahmedabad Municipal Corporation having its office in Sardar Patel Bhavan, Danapith, Ahmedabad- 380001 (herein-after referred to as ‘M/s AMC’ or ‘noticee’) are having service tax registration no. AAALA0024CST005 under the category of “Renting of Immovable Property” service as defined under section 65(105) (zzzz) and made taxable under Section 65(90a) of the Finance Act, 1994.

1.1 The noticee is the owner of Sardar Patel Stadium located at Navrangpura, Ahmedabad and directly controls its management.

2. The noticee rented the Sardar Patel Stadium to M/s Essel Sports Private Limited (herein-after referred to as ‘M/s ESPL’) as a training ground and to host some matches of the Indian Cricket League (ICL) launched by M/s. ESPL.

2.1 M/s AMC and M/s ESPL entered into an agreement with regard to utilization of Sardar Patel Stadium on 22.08.2008.

2.1.1 As per the said agreement, M/s AMC permitted M/s ESPL the use of Sardar Patel Stadium, Navrangpura, Ahmedabad, for a minimum period of 10 years, subject to certain terms & conditions which were listed out in the said Agreement.

2.1.1.2 It was noticed from the said agreement that - - M/s ESPL was required to develop, upgrade and renovate the stadium at a onetime cost

of Rs. 10,00,00,000/- (Rs. Ten Crores only), however, on expiry of the licence term, all the moveable and immovable assets and / or temporary renovations made by ESPL during the terms of the agreement would solely belong to AMC.

- Further, in consideration for AMC licensing the stadium to ESPL, M/s ESPL was required to pay AMC an all inclusive sum of Rs. 12,00,000/- (Rs. Twelve Lacs only) in four equal instalments of Rs. 3,00,000/- (Rs. Three Lacs only) each, every quarter in advance, per year of usage. A provision to increase 10 % rent every 3 calendar years on the last paid annual monthly lease rent paid by M/s ESPL to M/s AMC.

2.1.2 It is further evident from the above agreement that:(a) M/s ESPL during the tenure of the agreement was required to install lights, fixed and

movable assets, etc. and was responsible for maintaining the stadium during the events. (b) The responsibility of maintaining the pitch was with M/s AMC & M/s ESPL during the

term of the agreement. (c) M/s AMC was required to ensure that the stadium was made exclusively available to M/s

ESPL as may be required by M/s ESPL from time to time. M/s ESPL may need to use the stadium from October to November & February to April in any given year.

(d) M/s ESPL was also responsible to make payments towards electricity, water, sewage and other services at actual during the time the stadium is under possession of M/s ESPL.

(e) M/s AMC shall not take part in, co-operate with or assist any other person to undertake activities which amount to any marketing, advertising and public relations activities relating to the League, which are intended to capitalize on the goodwill associated with the League and/or make unauthorized use of any rights and opportunities relating to the League (including any tickets) but which are undertaken by a person/entity not authorized to do so by M/s ESPL.

(f) M/s AMC grants to M/s ESPL the right to use M/s AMC’s or the Stadium’s name, video graphs, photographs, and picture likeness by radio broadcast, telecast, motion pictures, videotape, photograph or any other media, in connections with any and all promotional advertising and trade purposes of M/s ESPL.

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(g) M/s AMC shall not at any time, without the prior written approval of M/s ESPL, receive from any person other than M/s ESPL any money, benefit or other reward (whether financial or otherwise) in relation to any services provided or to be provide by M/s AMC under this agreement.

2.2 It was thus noticed that the noticee entered into an agreement with M/s ESPL where-under the noticee ensured that the stadium was made exclusively available to M/s ESPL as may be required by M/s ESPL from time to time subject to the condition that M/s ESPL spent Rs.10 Crore, a one time cost to develop, upgrade and renovate the stadium, at the time of taking over the stadium and also pay Rs.12 lakhs per annum to the noticee. Thus, the consideration, in respect of usage of stadium by M/s ESPL, was not wholly consisting of cash/money but consisted of two parts, i.e.,

a. Rs.12 lacs per annum which was to be paid directly to the noticee by M/s ESPL as annual lease rent, and

b. the amount of Rs.10 Crores which was a one time cost to develop, upgrade and renovate the stadium, at the time of taking over the stadium by ESPL.

Both the above payments appeared inter-linked. M/s ESPL agreed to bear onetime cost of Rs. 10 Crore to develop, upgrade and renovate the stadium which after the expiry of the license term would solely belong to M/s AMC. In lieu of the same, M/s AMC fixed Rs.12 lacs per annum to be paid by M/s ESPL as annual lease rent. Had M/s AMC borne the payment for development, up-gradation and renovation of the stadium they would have charged much more as annual lease rent. Thus, it appeared that the payments per annum and the one time expenditure incurred by M/s ESPL formed an integral part of the agreement and constituted an obligation on the part of M/s ESPL to be fulfilled. The services provided by the noticee in the form of leasing out the stadium to M/s ESPL fell under the category of “Renting of Immovable Property Service” and thereby appeared taxable.

3. Levy of service tax on “Renting of Immovable Property Service” was introduced vide Notification No. 24/2007 dated 22.05.2007 which came into effect from 01.06.2007 and tax became leviable under sub-clause (zzzz) of clause 105 of Section 65 of the Finance Act, 1994.

3.1. As per Section 65 (90a) of the Finance Act, 1994, “Renting of Immovable Property” includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce but does not include —(i) Renting of immovable property by a religious body or to a religious body; or(ii) renting of immovable property to an educational body, imparting skill or knowledge or lessons on

any subject or field, other than a commercial training or coaching centre;

Explanation 1.—For the purposes of this clause, “for use in the course or furtherance of business or commerce” includes use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple-use buildings;]*

Explanation 2.— For the removal of doubts, it is hereby declared that for the purposes of this clause “renting of immovable property” includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property;

3.2. Further, section 65(105) (zzzz) of the Finance Act, 1994, the taxable service of renting of immovable property has been defined as follows:

"taxable service" means any services provided or to be provided to any person, by any other person, by renting of immovable property or any other service in relation to such renting, for use

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in the course of or, for furtherance of, business or commerce

Explanation 1.—For the purposes of this sub-clause, "immovable property" includes—(i) building and part of a building, and the land appurtenant thereto;(ii) land incidental to the use of such building or part of a building;(iii) the common or shared areas and facilities relating thereto; and(iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate, but does not include-(v) vacant land, given on lease or license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce, but does not include;

(a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes;

(b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land;

(c) land used for educational, sports, circus, entertainment and parking purposes; and

(d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.

Explanation 2.—For the purposes of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce;

3.3. The Finance Act, 2010 has amended the definition of the taxable service ‘Renting of Immovable Property’ [section 65 (105) (zzzz)] to the extent of following:

(i) to provide explicitly that the activity of ‘renting’ itself is a taxable service. This change is being given retrospective effect from 01.06.2007: and

(ii) to provide that renting of vacant land, where the agreement or contract between the lessor and lessee provides for undertaking construction of buildings or structures on such land for furtherance of business or commerce during the tenure of the lease, shall be subjected to service tax.

3.4 Further more as per Section 67 of Finance Act, 1994,

“(i) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall, -………

(ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration;”

3.5. Further as per Rule 3 of Service Tax Valuation (Determination) Rule, 2006:

Manner of determination of value.– Subject to the provisions of section 67, the value of taxable service, where the consideration received is not wholly or partly consisting of money, shall be determined by the service provider in the following manner:–

(a) the value of such taxable service shall be equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;

(b) Where the value cannot be determined in accordance with clause (a), the service provider shall determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.

4. In view of the above, as per Rule 3(b) of Service Tax Valuation Determination Rules, 2006 read with Section 67 of Finance Act, 1994, the noticee should

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have paid service tax on Rs.12 lakhs received as lease rent and the amount of Rs. 10 crores spent by M/s ESPL towards development, up gradation and renovation of the stadium under the category of “Renting of Immovable Property Service”.

5. INQUIRY WITH AMC: On inquiry with M/s AMC, it was learnt that they had no information regarding the amount spent by M/s ESPL to develop, upgrade and renovate the stadium. Accordingly, the matter was taken up directly with M/s ESPL.

5.1 Summonses dated 28-09-2011 and 17-11-2011 were issued to the M/s AMC to give the statement, to produce the details of infrastructure & facilities created by M/s ICL/ESPL at the stadium in question and all other relevant documents. Thereafter, on 26-12-2011, Shri Janak Rajendrakumar Dave, Chief Accountant of M/s AMC appeared for giving statement and submission of other details required for completion of the enquiry in this case.

5.2. Statement of Shri Janak Rajendra Kumar Dave, the Chief Accountant of M/s AMC, Ahmedabad was recorded on 26-12-2011, wherein he produced a copy of said agreement dated 22.08.2008.

5.2.1 Shri Dave in his statement inter-alia stated as follows:

- M/s AMC received only Rs.12 Lakhs for the first year of the agreement i.e. w.e.f. 01.09.2008 to 31.08.2009.

- Ahmedabad Municipal Corporation is registered with service Tax under the category of “Renting of Immovable Property” having Service Tax Registration No. AAALA0024CST005;

- they are paying Service Tax & filing the ST-3 returns regularly ; - as far as receipt of Rs.12 lakhs rent received from M/s ESPL, the service tax had already

been paid vide challan dated 20.11.2010 to the tune of Rs. 1,12,059/- along with interest amount of Rs.16,054/- vide challan dated 20-11-2010 and 04-05-2011 ;

- after the aforesaid receipts of rent of Rs. 12.00 lakhs in total for the period from 01.09.2008 to 31.08.2009 i.e first year of the agreement, no further rent was received as M/s ESPL did not use their stadium and no rent was received by M/s AMC ;

- the matter was taken up by M/s AMC with Business Head of M/s ICL/ESPL namely Mr. Himanshu Modi for payment of rent vide their letter dated 13.10.2009 but they had not received response from M/s ESPL ;

- the matter again was taken up afresh with them( ESPL ) vide their letter dated 19.11.2009 stating that for their failure to pay the rent, the License Agreement made on 22.8.2008 will be terminated, once again they (AMC ) had not received any response from M/s ESPL and accordingly the act of termination of agreement was endorsed by the standing committee of AMC vide resolution dated 10.12.2009.

- for conducting the ICL cricket tournament in Ahmedabad Stadium, M/s ESPL was required to install some of the basic infrastructure in the stadium at their own cost and on expiry of the aforesaid agreement between them (AMC) and M/s ESPL, the infrastructure so created will remain with M/s AMC and they were not to be removed and taken away by M/s ESPL. This condition is given at clause 3 (b) that “M/s ESPL shall develop, upgrade and renovate the stadium at the time of taking over the stadium and shall bear one time cost of approximately Rs. 10 Crores (Ten Crores). It was clarified that all movable and immovable assets and / or temporary renovation made by ESPL during the term of this agreement shall belong solely and exclusively to AMC, on expiry of license Term.” ;

- M/s ESPL created infrastructure and renovation in M/s AMC stadium like flood lights, painting, pavel blocks etc. but M/s AMC is not aware of the cost of said expenditures incurred by M/s ESPL on this count ;

- M/s ESPL had not approached M/s AMC for this purpose and they have not made any communication with M/s AMC on this account.

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- they had not asked M/s ESPL to remove their fixtures on premature to termination of the agreement as M/s ESPL is not in touch with them ;

- as per agreement, on expiry of the agreement of 10 years all this fixtures fitted by M/s ESPL were to be property of M/s AMC , it was one of the conditions but M/s AMC had to terminate the agreement for not fulfilling the conditions by M/s ESPL as M/s AMC had also informed to ICL/ESPL vide their letter dated 24.12.2009 that agreement is cancelled vide resolution dated 10-12-2009 passed by the Standing Committee of AMC.

- the fixtures so fitted by M/s ESPL still remains in the stadium owned by M/s AMC but M/s AMC may take some action after obtaining legal opinion and that to be decided by the standing Committee of the AMC:

- M/s AMC is also aware of service tax law that any taxable income received on rendering taxable service in cash or kind or both is taxable.

5.3 In view of the above, it appeared that the noticee was providing ‘Renting of Immovable Property Service’ for which they had obtained registration from Service Tax department in accordance with the provisions as laid down under the Finance Act, 1994 and the rules made thereunder. The noticee paid only Rs. 1,12,059/- as service tax along-with interest of Rs.13,809/- on the rental income of Rs.12,00,000/- received by the them during the period 01.09.2008 to 31.8.2009. However, the payment of service tax and the interest was not shown by the noticee in the ST-3 returns filed by them.

6. INQUIRY WITH ESPL:

AMC was not responding to the letters issued by service tax and hence, the matter was taken up with M/s ESPL.

6.1 M/s ESPL, have vide their letters dated 11.03.2011 and 18.05.2011 informed that Rs.5,66,99,452/- was spent by them towards the development of stadium.

6.1.1 Further, Shri Himansu Modi, Business Head-Indian Cricket League, 135, Continental Building, Dr. Annie Besant Road, Worli, Mumbai-18 was asked to submit the balance sheets and profit & loss account for the period from 2008-09 to 2009-10 and to give the statement vide letter dated 13.07.2012 and summoned on 16.07.2012 to appear on 30.07.2012 or 08.08.2012 or 21.08.2012.

6.1.2 M/s ESPL vide letter dated 11.03.2011 & 18.5.2011 informed that they had incurred an expenditure of Rs.5,66,99,452/- towards upgradation of the Sardar Patel Stadium like fitting/fixtures & installation of flood lights, painting work, etc. and they had not removed their fixtures.

6.2 The summons issued on 16.7.2012 was not honoured by either Shri Modi or any of his representatives. However, they have vide their letter dated 08.08.2012 submitted all the required documents viz.

- all invoices, - rate list, - bill wise, date wise and item wise details of expenditure and - the audited balance sheet / profit & loss account for the financial year 2008-09 along with

all schedules thereof, relating to expenditure made by M/s ESPL into up gradation of Sardar Patel Stadium.

6.3 A worksheet showing the expenditure incurred by ESPL on Ahmedabad Stadium (Sardar Patel Stadium Ahmedabad) till 31.03.2010 was prepared on the basis of the

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documents submitted by M/s ESPL. The details of the expenditure incurred and capitalized are as under:-

Sr. No.

Expenditure by M/s ESPL towards installation etc.

Party Name Bill No. Date Bill Amount

Date of capitalisation

Amount Remarks

1 Cost of flood lighting system

Dev Musco Lighting P. Ltd

DMPL/2008-09/--3

16.04.08 32254000 20.10.08 32254000

2 Reimbursement of transport charges for high masts, panel and cables, labour, warehousing etc.

Dev Musco Lighting P. Ltd

DMPL/ESSEL/002/08-09

20.10.08 2361000 20.10.08 2361000

3 Final bill towards supply and installation of sports flood lighting system at Sardar Patel Stadium, Ahmedabad.

Dev Musco Lighting P. Ltd

DMPL/002/08-09

20.10.08 15518367 20.10.08 13006900

4 Dev Musco Lighting P. Ltd

DMPL/002/08-09

31.12.08 6255930 20.10.08 6255930 Tax amt. of Dev Musco bills capitalized.

5 Painting and civil work

J.K.Decorators Bill No.4 05.11.08 1132477 20.10.08 1138706

6 Charges for various jobs such as paver block fitting, seat repairing, leveling of entire ground outside the stadium etc.

Mittal Engineering

Bill No.29 18.11.08 882916 20.10.08 882916

Ravi Sharma Bill No.17 01.01.09 2506956 20.10.08 25069567 Ravi Sharma Bill No.18 01.01.09 2506956 20.10.08 2506956

Ravi Sharma Bill No.19 01.01.09 100000 20.10.08 100000Grand Total 6,10,13,364

6.3.1 It is evident from the above table that M/s ESPL had spent Rs.6,10,13,364/- on up-gradation of Sardar Patel Stadium till 31.03.2010. While examining the expenditure incurred, it was noticed that the major work of “Flood Light Fixures” of Rs.5,38,77,830/- was done by M/s Dev Musco Lighting P. Ltd., Delhi.

6.4 M/s ESPL vide their letter dated 08.08.2012 intimated that they had incurred Rs.5,66,99,452/- against up-gradation / renovation of Sardar Patel Stadium, Ahmedabad. However, the figures for expenditure provided by M/s ESPL vide their letter dated 8.8.2012 did not match with the figures arrived at (para 6.2 supra) after considering the documents submitted by them. This clearly showed that the total/actual expenditure

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incurred by M/s ESPL for up-gradation of Sardar Patel Stadium was never provided by them to the department during the course of investigation.

6.3 M/s ESPL was required to spend Rs.10 crore at the time of taking over the stadium. This meant that before the commencement of matches, they were required to spend the said amount. A total of 10 ICL Cricket matches were played between the period from 18.10.2008 to 13.11.2008 which confirmed the fact that the Sardar Patel Stadium was upgraded by M/s ESPL by incurring the expenditure of Rs.10 Crore before or during the commencement of ICL Cricket matches. The expenditure of Rs. 10 crore had a direct relation to the lease rent charged by AMC from M/s ESPL, in other words, if the expenditure towards the renovation of the stadium was less than Rs.10 Crore then the lease rent charged by M/s AMC would have been much more than Rs.12 lakhs. Thus, in this particular case, M/s AMC received the amount of Rs. 10 crore in kind/ consideration and not in cash /money, and therefore, as per Rule 3(b) of the Service Tax Valuation Determination Rules, 2006, read with Section 67 of the Finance Act, 1994, this value was to be considered as taxable value and the same was liable to service tax as defined under Section 65(105)(zzzz) and the same was taxable under Section 65(90a) of the Finance Act, 1994.

7. It thus appeared that the total consideration received by the noticee was not wholly consisting of money received directly, but also in the form of expenditure incurred by M/s ESPL for renovation of the stadium, hence the total value for the purpose of computing service tax liability would be Rs.12 lacs per annum plus Rs.10 Crore which comes to Rs.10,12,00,000/-. Thus, in terms of Rule 3(b) of Service Tax (Determination of Value) Rules, 2006, the noticee was required to pay service tax on Rs.10,12,00,000/- at appropriate rate which comes to Rs. 1,24,89,780/-. Further, the noticee did not show Rs.12 Lakh of lease rent for Sept-2008 to Aug-2008 in their ST-3 returns and the noticee has already paid service tax of Rs.1,25,868/- (including interest of Rs.13,809/-), on the Rs. 12 lacs received by them from M/s ESPL, vide challan dated 20.11.2010.

8. It appeared that the said services provided by the noticee to M/s ESPL fell under the category of “Renting of Immovable Property Service” and thereby taxable under Section 65(105)(zzzz) of the Finance Act, 1994. It further appeared that the noticee had obtained service tax registration as required under Section 69 of the Finance Act, 1994 and they had discharged their service tax liability on the amount of Rs.12 lakh received in cash for the first year of contract i.e. 01.09.2008 to 31.08.2009 to the tune of Rs.1,12,059/- along with interest of Rs.13,809/-. The noticee received total rent income of Rs.10,12,00,000/- Crore on which service tax amounting to Rs.1,24,89,780/- was required to be paid for the period upto 31-03-2010 (agreement cancelled on 10.12.2009 ) by the noticee. The noticee with an intent to evade payment of service tax, however, did not declare the same in their ST-3 returns, nor did they pay the same to the Government account. Thus, it appeared that the noticee was guilty of willful suppression with a view to evade payment of service tax of Rs. 1,24,89,780/-. Therefore, the extended period of five year was applicable in the case for the purpose of issuing notice for non-payment of service tax under Section 73(1) of Finance Act, 1994.

9. Thus, it appeared from the foregoing discussion that the noticee contravened the provisions of:i) Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules,

1994 in as-much-as they have failed to pay the service tax amounting to

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Rs.1,24,89,780/- in case of “Renting of Immoveable Property” within stipulated time as mentioned in para supra for the period upto 31-03-2010 to the credit of the Government within the stipulated time limit;

(ii) Section 70 of the Finance Act, 1994, as amended read with Rule 7 of the Service Tax Rules, 1994 in as much as they have failed to self-assess the service tax on the taxable value received by them and file correct ST-3 returns..

10. Further, as per Section 75 ibid, every person liable to pay the tax in accordance with the provisions of Section 68, or rules made there under, who fails to credit the tax or any part thereof, to the account of the Central Government within the period prescribed, shall pay simple interest (at such rate not below ten percent and not exceeding thirty six percent per annum, as is for the time being fixed by the Central Government, by notification in the official Gazette) for the period by which such crediting of the tax or any part thereof is delayed. The noticee by not discharging their service tax liability became liable to pay interest under Section 75 of the act.

11. It appeared that the noticee had deliberately not discharged their service tax liability. The deliberate efforts in not paying the correct amount of service tax was in utter disregard to the requirements of law and constitute a breach of trust deposed on them. Such outright act in defiance of law appeared to have rendered them liable for stringent penal action as per the provisions of Section 78 of Finance Act, 1994 for suppression or concealment or furnishing inaccurate value of taxable service with intent to evade payment of service tax. Thus, all the above acts of contravention on the part of the noticee appeared to have been committed by way of suppression of facts with an intend to evade payment of service tax and, therefore, the said service tax not paid is required to be demanded and recovered from them under the proviso to Section 73 (1) of the Finance Act, 1994 by invoking extended period of five years. All these acts of contravention of the provisions of Section 68 and Section 70 of the Finance Act, 1994 read with Rule 4, Rule 6 and Rule 7 of the Service Tax Rules, 1994 appeared punishable under the provisions of Section 76, Section 77 and Section 78 of the Finance Act, 1994 as amended from time to time.

12. Now therefore, the noticee vide show cause notice (SCN) F.No.STC/4-14/O&A/12-13 dated 29.8.2013 was called upon to show cause to the Commissioner, Service Tax as to why-

(i) Services rendered by them should not be considered as taxable service under the category of “Renting of Immovable Property Service” as defined under Section 65 of the Finance Act 1994, as amended, and the amount of Rs.10,12,00,000/- should not be considered as taxable value.

(ii) Service tax amounting to Rs.1,24,89,780/- (including Education Cess and SHEC) for the period upto 10-12-2009 should not be demanded from them under Section 73(1) of the Finance Act, 1994, invoking the larger period of five years. Further, as service tax of Rs.1,12,059/- has already been paid by them , why the same should not be appropriated.

(iii) Interest as applicable on the amount of service tax liability of Rs.1,24,89,780/- should not be recovered from them for the delay in making the payment, under

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Section 75 of the Finance Act, 1994 as amended; Interest amounting to Rs.13,809/- already paid by them should not be appropriated.

(iv) Penalty under Section 77 (1) (b) of the Finance Act 1994 should not be imposed upon them for failure to keep, maintain books of accounts and other documents as required under the provisions of the Finance Act, 1994 or rules made there under.

(v) Penalty under Section 77 (1) (c) (i) should not be imposed on them in as much as they have failed to furnish information called by an officer in accordance with the provisions of this Chapter or rules made thereunder;

(vi) Penalty under Section 77 (1) (c) (ii) should not be imposed on them in as much as they have failed to produce documents called for by an Officer in accordance with the provisions of this Chapter or rules made there under;

(vii) Penalty under Section 77 (2) of the Finance Act 1994 should not be imposed upon them for the contravention the provisions of Section 70 of the Finance Act, 1994 for failure to self assess the tax due on the services provided by him.

(viii) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994 as amended for suppressing the value of taxable services provided by them before the Department with intent to evade payment of service tax amounting to Rs.1,24,89,780/-.

13. DEFENCE – The noticee vide their defence reply dated 27.6.2014 has contested the allegations made in the show cause notice. The main points of defence as contained in their reply are as follows-

13.1 The present show cause notices is vague and cryptic - The noticee states that the show cause notices is vague and beyond comprehension. The show cause notice does not indicate the activity undertaken by them which is sought to be taxed by the department falls under which part of the definition of the terms mentioned in the respective definitions of the taxable services. The Department by way of table has shown the amount spent by ESPL on up gradation of the Stadium is Rs.6,10,13,364/-, however, while quantifying the amount of taxability, show cause notice has considered Rs. 10 crore which is not spent by ESPL.

13.1.1 The noticee has relied upon the decision of the Hon’ble Supreme Court in the case of Amrit Foods V/s CCE 2005 (190) ELT 433 (SC), wherein the Hon’ble Supreme Court has held that the noticee has to be put on notice as to the exact nature of contravention for which he is liable. Relevant extract from the said judgment is reproduced herewith as under:

“5. The Revenue has preferred an appeal from the order of the Tribunal setting aside the imposition of penalty under Rule 173Q of the Central Excise Rules, 1944. The Tribunal has set aside the order of the Commissioner on the ground that neither the show cause notice nor the order of the Commissioner specified which particular clause of Rule 173Q had been allegedly contravened by the appellant. We are of the view that the finding of the Tribunal is correct. Rule 173Q contains six clauses the contents of which are not same. It was, therefore, necessary for the noticee to be put on notice as to the exact nature of contravention for which the noticee was liable under the provisions of the 173Q. This not having been done the Tribunal’s finding cannot be faulted.”

… (underlining supplied)

13.2 Gross amount ‘charged by the service provider’ as consideration would be the taxable value on which service tax needs to be discharged – The noticee has argued that the charge for service tax is on providing taxable services by service provider to a service receiver. The assessable value is the “gross amount charged” by the service provider for the service provided by it.

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13.2.1 The noticee has reproduced the relevant portion of Section 67 of the Finance Act, 1994 which deals with valuation of taxable services and states that Section 67 of the Finance Act substantiates that the value of the taxable service may be in a form of monetary value or consideration in other form which may or may not be ascertainable, but the common point in all the conditions is that the taxable value would be for ‘provision of service’. The said aspect is further explained in the Explanation clause by explaining the term ‘consideration’ which would form the taxable value on which service tax needs to be discharged by the noticee. Consideration will be any amount for the taxable service provided or to be provided by the service provider.

13.2.2 The noticee further refers to Rule 3 of the Service Tax (Determination of Value) Rules, 2006 to clarify that if the consideration or ‘gross amount charged’ is not wholly or partly consisting of money, in such case, the value would be determined as per sub-clause (a) of the Rule 3 which states that gross amount charged by the service provider to provide similar service to another person in the ordinary course of trade where gross amount charged in the sole consideration. Meaning thereby, that whatever gross amount is charged by the service provider in providing services which may be either in monetary or non-monetary form would become the consideration on which service tax needs to be discharged.

13.2.3 The noticee submits that in all the three conditions whether consideration flows in money or non-monetary or not ascertainable, the benefit gets accrued to the service provider which is made the part of the gross amount to be charged for levy of service tax. The consideration which is not received by the service provider in any form or has not accorded any benefit to the service provider will not form part of the gross amount charged for levy of service tax. A service provider puts in his labour and skill for providing service to the service receiver and depending upon this he asks for the consideration for his service. There is no concept like intrinsic value of service. Service provided is equal to the amount of labour and skill put in by the service provider. Consequently, the value of service provided would be equal to the consideration asked for by the service provider. Thus, the value of the service would depend strictly upon the terms of contract between the parties.

13.2.4 The noticee submits that the phrase “Gross Amount Charged” is to be interpreted in the context of Section 67 of the Act and the expression can include only the amount which is charged by the service provider.

13.2.5 The noticee states that in the case of the M/s. Bhayana Builders (P) Ltd v. CCE reported at 2013-TIOL-1331-CESTAT-DEL-LB, the Tribunal gave the following observation:-

That Section 67 of the Act deals with valuation of taxable services and intends to define what constitutes the value received by the service provider as "consideration" from the service recipient for the service provided. Implicit in this legislative architecture is the concept that any consideration whether monetary or otherwise should have flown or should flow from the service recipient to the service provider and should accrue to the benefit of the later. "Free supplies", incorporated into construction (cement or steel for instance), even on an extravagant inference, would not constitute a non-monetary consideration remitted by the service recipient to the service provider for providing a service, particularly since no part of the goods and materials so supplied accrues to or is retained by the service provider. Wherever a monetary consideration is charged for providing the taxable service and no non-monetary consideration forms part of the agreement between the parties, it is clause (i) that applies and the value of the taxable service would in such case be the gross amount charged by the service provider and paid by the service recipient.

That on construing the provisions of Sections 66 and 67 (1)(i) together and harmoniously, it is clear that the value of taxable service shall be the gross amount charged by the service provider; and nothing more and nothing less than the consideration paid as a quid pro quo for the service can be brought to charge.

13.2.6 The interpretation of the term ‘gross amount charged’ as per Section 67 of the Finance Act, according to noticee, makes it clear that only the value which is charged by the

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service provider for providing services to the service recipient would become taxable value on which service tax needs to be discharged.

13.3 Service Recipients/ Customers’ amount invested for renovation and up gradation of Stadium is not additional consideration - According to noticee, Section 2(d) of the Indian Contract Act, 1872 defines 'consideration' as an act or abstinence done by the promisee at the desire of the promisor. Consideration is either a benefit to the promisor or a detriment to the promisee. In the above situation, when the owner has decided to engage three service providers, it cannot be that the drawings and approval obtained by the owner becomes a benefit to the construction contractor or a detriment to the owner. Therefore, in legal terms, they are not ‘consideration’ of the construction contractor. The noticee relies upon the decision of the Hon'ble Supreme Court in the case of Moriroku UT India (P) Ltd. Vs. State of U.P. reported at 2008 (4) SCC 548 wherein it was held that sales tax is exigible on real price received or receivable by the dealer in respect of a sale unlike excise duty is exigible on the real value of the excisable article. The relevant portion of Para 23 of the Judgement of the Supreme Court is extracted below:

On the other hand, excise duty is a levy on a taxable event of “manufacture” and it is calculated on the “value” of manufactured goods. Excise duty is not concerned with ownership or sale. The liability under the excise law is event-based and irrespective of whether the goods are sold or captively consumed. Under the excise law, the liability is there even when the manufacturer is not the owner of raw material or finished goods (as in the case of job workers). Excise duty, therefore, is independent of ownership (see: Ujagar Prints & Ors. v. Union of India & Ors. also reported in [(1989) 3 SCC 488]. Therefore, for sales-tax purposes, what has to be taken into account is the consideration for transfer of property in goods from the seller to the buyer. For this purpose, tax is to be levied on the agreed consideration for transfer of property in the goods and in such a case cost of manufacture is irrelevant. As compared to the sales-tax law, the scheme of levy of excise duty is totally different. …

13.3.1 The noticee also relies upon the concept of ‘Consideration’ as explained in Para 90 of the Goods and Service Tax Ruling 2001/6 and states that the term ‘Consideration’ can include only those goods/materials which provide economic value to the service provider in return for the service provided by the service provider. In the present case, the upgradation done by ESPL at Stadium is for the personal use and not for noticee and therefore does not constitute ‘consideration’ for the services provided by it. The aforesaid Ruling also makes it clear that while interpreting the term ‘consideration’, the question as to what would have been the amount charged by the service provider had the service provider bought the goods on its own is not relevant.

13.3.2 The noticee states that the sine qua non for an amount to form part of the value for the purposes of the notification is that it should be the amount ‘charged’ by the service provider. Where there is no amount ‘charged’ for by the service provider be it for goods or for services, the question of the same forming part of the gross amount charged just cannot arise.

13.3.3 The noticee submits that the amount invested by the service recipient for upgradation of the Stadium does not constitute ‘consideration’ for the service provider. It is submitted that for any amount to be called as a consideration, it should essentially have the following characteristics.(i) It must lead to detriment to the promisor and a benefit to the promise. In the present case, the

service recipient does not suffer any detriment by up gradation of the Stadium as the renovation and up gradation of the stadium by ESPL is for its own personal use. Further, there is no benefit that flows to the service provider as in the present case, the materials such as flood lights installed by the service recipient can be operated by the service recipient for its own use and cannot be operated by them, service provider. Further, as per clause 3A of the agreement on expiry of the License Term, all the assets would have got transferred to the service provider but since termination took place prior to license term, i.e, span of 10 years, the status of the assets is unknown to both the parties. Even after span of 10 years, the noticee cannot operate the flood

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lights as password is with ESPL to operate the same. Therefore, service provider is not benefited by the up gradation of the Stadium.

(ii) For anything to be called as a consideration, it must be shown that the person receiving the item is free to use it in whatever manner he likes. If there are fetters in the contract as regards the use of the item, the value of such item cannot constitute consideration for the service provider.

(iii) Under the service tax provisions, only the amount that is charged by the service provider and which flows to the coffers of the service provider can be considered as a consideration for the service provider. In the present case, the effective control and possession of the materials used in the up gradation of the Stadium remains with the service recipient and the service provider cannot use such goods/materials for his benefit. The noticee relies upon the judgment in the case of Sonia Bhatia vs. State of U.P. reported at AIR 1981 Supreme Court 1274 wherein the Hon’ble Apex court held as under:

“20. From a conspectus therefore of the definition contained in the Dictionaries and the books regarding a gift or an adequate consideration, the inescapable conclusion that follows is that “Consideration” means a reasonable equivalent or other valuable benefit passed on by the promisor to the promise or by the transferor to the transferee . Similarly, when the words “Consideration is qualified by the word “adequate”, it makes consideration stronger so as to make it sufficient and valuable having regard to the facts, circumstances and necessities of the case……………”

13.3.4 As per noticee, the aforesaid judgment of the Apex Court makes it clear that for anything to be called as consideration for the service provider, it must be a benefit which is passed on by the service recipient to the service provider. The up gradation of the Stadium by the service recipient for its own use is not consideration for the services provided by the service provider.

13.3.5 The noticee further submits that in the facts of the present case, the value of the service provided by them is to be determined under sub-clause (i) of section 67 (1) of the Act and not under sub-clause (ii) as the noticee has not received any consideration in kind in addition to the money paid by the service recipient on which appropriate service tax has already been paid.

13.3.6 The noticee states that in the present case, it is an undisputed fact that the noticee has only received the amount to the tune of Rs.12,00,000/- from ESPL and no other value in other form is received by the noticee in monetary or non-monetary form. As also stated in the facts of the case supra, the effective control and possession of the flood lights is with ESPL as it is operated by the electronic machine in which password needs to be entered which is with ESPL. The noticee has no access to the operation of the flood lights and other upgradation made by the ESPL in the stadium.

13.4 Contractual supply is essence of service tax. Value liable to service tax would be the ‘consideration’ received by the service provider under the contract as per Section 67 of the Finance Act - The service tax provisions are directed to the contractual arrangements between service provider and service receiver. The consideration accruing to service provider under the contractual arrangements alone is liable to service tax. Such consideration can be in cash or kind.

13.4.1 The service provider puts in its labour and skill for providing service to the service receiver and depending upon this, it asks for the consideration for its service. Thus, the value of the service would depend strictly upon the terms of contract between the parties. 13.4.2 There is no concept like intrinsic value of service. Service provided is equal to the amount of labour and skill put in by the service provider. Consequently, the value of service provided would be equal to the consideration asked for by the service provider. It is to be noted that Section 67 talks about the value of taxable service provided by the service provider and not about the value of product resulting from such service.13.5 Without prejudice to the above made submission, the taxable value of Rs.10 crore cannot be made taxable under the category of “Renting of Immovable property”- The

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Department has issued the show cause notice upon the noticee demanding service tax amounting to Rs.1,24,89,780/- under the category of “renting of immovable property”.

13.5.1 Noticee explains that Renting of Immovable property was introduced in the Finance Act on 01.06.2007 under Section 65(90a) of the Finance Act, 1994 and Section 65 (90a) of section 65 of the Act defined the words ‘renting of immovable property’ as follows:-

‘(90a) renting of immovable property includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course of furtherance of business or commerce but does not include-(i) renting of immovable property by a religious body or to a religious body; or(ii) renting of immovable property to an educational body, importing skill or knowledge or lessons or any subject or field other than a commercial training of coaching centre.Explanation – For the purpose of the clause, “for furtherance of business or commerce” includes use of immovable property as factories, office buildings, ware houses, theatres, exhibition halls and multiple use buildings.

With effect from 16.05.2008, the above Explanation 2 was inserted as follows:-Explanation 2 – For the removal of doubts, it is hereby declared that for the purpose of this clause ‘renting of immovable property’ includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property.

Section 65 (105)(zzzz) defines taxable service of renting of immovable property which is as follows:-

“(zzzz) to any person, by any other person, by renting of immovable property or any other services in relation to such renting, for use in the course of or for furtherance of, business or commerce”Explanation 1 – For the purpose of the sub-clause, ‘immovable property’ includes –(i) building and part of a building, and the land appurtenant thereto;(ii) land incidental to the use of such building or part of building;(iii) the common or shared areas and facilities relating thereto; and(iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate,(v) vacant land, given on lease or license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce”But does not include-(a) vacant land solely used for agriculture, farming, forestry, animal husbandry, mining purposes;(b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land;(c) land used for educational, sports, circus, entertainment and parking purposes; and(d) building used solely for residential purposes and buildings used of the purpose of accommodation, including hotels, hostels, boarding houses, holiday accomofdation, tents, camping facilties.

13.5.2 The Board vide Circular No. 98/1/2008-S.T., dated 4-1-2008 clarified that right to use immovable property is leviable to service tax under renting of immovable property service. 13.5.3 The amount received by the noticee for providing the right to use of immovable property would be leviable to service tax under renting of immovable property. No other amount is received by the noticee which can be made taxable under the category of renting of immovable property.

13.5.4 The scope of taxable service under renting of immovable property extends to any other services provided in relation to such renting of immovable property. The only service flowing from noticee to ESPL is providing the license to use the Stadium for which rent was received for one year. No other services have been provided by the noticee in relation to the renting of immovable property. The amount invested by ESPL at Stadium to hold Cricket

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matches is meant for its own purpose and by no stretch of imagination can be made taxable under the category of renting of immovable property.13.5.5 The scope of immovable property defined by the Legislature is complied by the noticee by discharging service tax on the rent received by the noticee for renting of the Stadium. But the amount which is invested by ESPL for its own use cannot be made taxable under the category of renting of immovable property.

13.5.6 Without prejudice to the above made submissions, from the facts of the case it is clear that majority amount invested by ESPL is on flood lights and other materials which clearly comes under the scope of ‘goods’. The explanation clause under Section 65(105)(zzzz) defines the scope of immovable property which does not include movable goods in its jurisdiction. Therefore, the value of the same cannot be made taxable under the category of ‘renting of immovable property’.

13.6 ESPL has invested Rs.6.1 crore out of 10 crores for up gradation of Stadium by availing the services of other contractors, on the said amount demand cannot be raised upon them - As per Department, out of Rs.10 crore to be invested by ESPL, the amount to the tune of Rs.6,10,13,364/- is invested by ESPL for up gradation of Stadium.

13.6.1 The bifurcation of the amount spent by ESPL is provided at para 6.3 of the show cause notice which shows that out of Rs.6,10,13,364/- spent by ESPL, Rs.5,38,77,830/- is utilized for purchase and installation of sports flood lighting system for which ESPL took services of Dev Musco Lighting P Ltd. ESPL has also availed services of other contractors which gives the calculation of the remaining amount spent by ESPL.

13.6.2 As services have been provided to ESPL by contractors on the payment of amount which is made a subject matter of dispute in the present case by the Department, the service tax liability arises upon such contractors and not on them.

13.6.3 The noticee submits that it is possible that contractors must have discharged service tax liability on the amount received by ESPL on which again the Department is asking service tax by the noticee under the category of ‘renting of immovable property’. On the same amount, tax is recovered by the Department under two different categories which clearly amounts to double taxation. On the same amount, service tax under two different categories by two different noticees cannot be recovered by the Department.

13.6.4 In case, the service tax is not yet discharged by contractors for the services provide by them to ESPL, for recovery of the said amount show cause notice issued to noticee demanding tax under the category of renting of immovable property is bad in law and not sustainable in the eyes of law.

13.7 Without prejudice to the above made submissions, quantification of demand is incorrect - The noticee submits that at para 6.3 of the show cause notice, the amount expensed out by ESPL is shown to the tune of Rs.6,10,13,364/- for up gradation of the Stadium in the first year. The amount quantified by the Department is Rs.10 crore on which demand is raised amounting to Rs.1,24,89,780/- against them, when only Rs.6,10,13,364/- has been spent by ESPL on stadium. Without assigning any reasoning, department has made the unutilized amount as part of the taxable value which is not even spent by ESPL for up gradation of Stadium.

13.8 The Entire Exercise is Revenue Neutral - Without prejudice to the above submissions, the noticee further submits that since the entire transaction is revenue neutral, the show cause notice is liable to be dropped for this reason also. The noticee submits that it is settled law that when the entire exercise is revenue neutral, there is no question of demand of any duty pertaining to the demand which is revenue neutral.

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13.8.1 In support of the above contention that no demand can be raised when the entire dispute is revenue neutral, reliance is placed by the noticee on the following judgments of the Hon’ble Supreme Court wherein it has been consistently held that once the exercise is proved to be revenue neutral, there is no question of sustaining the duty demand:-

Amco Batteries Ltd. Vs CCE 2003 (153) ELT 7 (SC) International Auto Ltd. Vs CCE 2005 (183) ELT 239 (SC) CCE Vs Narayan Polyplast Ltd. 2005 (179) ELT 20 (SC) CCE Vs Narmada Chematur Pharma 2005 (179) ELT 276 (SC) CCE Vs. Textile Corporation 2008 (231) ELT 195 (SC) CCE Vs. Jamshedpur Beverages 2007 (214) ELT 321 (SC) CCE Vs. Coca Cola India (Pvt.) Ltd. 2007 (213) ELT 490 (SC)

13.8.2 Noticee submits that in the present case since credit of service tax is available to the noticee itself the exercise will be revenue neutral in view of the Judgement of the larger bench of the Hon’ble Tribunal in the case of Jay Yushin 2000 (119) ELT 718 (Tri-LB) wherein the Tribunal has held that with particular reference to Modvat scheme (which has occasioned this reference) it has to be shown that the Revenue neutral situation comes about in relation to the credit available to the noticee himself and not by way of availability of credit to the buyer of the noticee’s manufactured goods.

13.8.3 In view of the foregoing submissions, the noticee submits that since the entire exercise in the present case is revenue neutral, the impugned show cause notice is unsustainable and is liable to be dropped on this ground itself.

13.9 Without prejudice, the computation of liability is incorrect – Noticee states that even if it is assumed that the service tax as alleged is payable by them, still the manner of calculation of the liability is not correct. The consideration which the noticee has received is inclusive of the service tax payable. In the case of excise duty also, it has been held that the amount received should be taken as cum-duty price and the value should be derived there from, by excluding the duty alleged to be payable as required under Section 4(4)(d)(ii) of the Central Excise Act, 1944.

13.9.1 In support of this submission, the noticee relies on the Larger Bench decision in the case of Sri Chakra Tyres 1999 (108) ELT 361. The said decision of the Larger Bench has been affirmed by the Hon’ble Supreme Court as the departmental appeal has been dismissed at order reported in 2002 (142) ELT A279 (SC). The noticee also rely on the Apex Court judgment in the case of CCE vs. Maruti Udyog Limited 2002 (49) RLT 1 (SC), wherein it has been held that the deduction under Section 4(4)(d)(ii) is allowable, even in situations where no duty was paid at the time of removal. Thus, for service tax calculation, the amount paid by the service receiver should be considered as cum tax payment and service tax should be calculated accordingly. The above view is also supported by Trade Notice No.20/2002 dated 23.5.2002 of Delhi-II Commissionerate, which reads as under:

“The liability to pay the service tax remains with the service provider in the current scenario. Failure to realize or even charge the 5% service tax does not negate this statutory liability. In event of any such failure, the amounts released from client in lieu of having rendered the service(s) will be taken to constitute amounts inclusive of service tax. Accordingly, the amount of service tax will be determined and required to be deposited to the credit of the Central Government”.

13.9.2 The above settled legal position as clarified by the above circular was given legal recognition with Explanation 2 which was added to Section 67 of the Finance Act, 1994 with effect from 10.09.2004 and now is a part of the amended Section 67 itself. Further, in the context of Service tax the issue is settled in favour of the noticee by the Tribunal decision in case of

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Advantage Media Consultant 2008 (10) STR 449 (Tri.-Kol) confirmed by Hon’ble Supreme Court 2009 (14) STR J49 (SC).

13.10 Demand Barred by Limitation - The show cause notice dated 29.08.2013 has been issued to the noticee invoking extended period of limitation from 01.09.2008 to 31.08.2009 alleging that the noticee has suppressed the fact that the noticee is providing various taxable service with an intention to evade payment of duty.

13.10.1 As per section 73(1) of the Act, where service tax is not paid, a show cause notice can normally be issued to a person chargeable with service tax, at any time within one year from the relevant date. Section 73(6) of the Act provides that, the relevant date for such purposes is, in a case where periodical returns are required to be filed, the date on which such return was filed or the last date of filing such return, where no such return is filed. However, in a case where non short payment is by reason of fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of the Act or Rules with an intent to evade payment of service tax, proviso to section 73(1) of the Act provides that the show cause notice can be issued at any time within 5 years from the relevant date. Thus, the extended period of limitation is applicable only if any of the ingredients specified above exist.

13.10.2 The allegation that the noticee has suppressed the value of taxable services with an intent to evade payment of service tax, the extended period of limitation is invokable under proviso to Section 73 (1) of the Act is totally incorrect and liable to be set aside.

13.10.3 The noticee submits that the noticee have regularly filed ST-3 Returns before the Department which is made as Annexure-4 supra.

13.10.4 Moreover, in order to allege suppression, there must be a positive act on the part of the noticee to withhold or hide the facts from the department with a view to evade payment of tax. Mere non-payment of service tax is not enough to allege that the noticee is guilty of suppression. Without any deliberate intention to withhold/ suppress information from the Department, invocation of the extended period of limitation cannot be justified. In the present case, the noticee has not committed any positive act to suppress information from the department with the intent to evade payment of service tax.

13.10.5 In this regard, the noticee relies on the judgment of the Hon’ble Supreme Court in the case of M/s Anand Nishikawa Co Ltd Vs Commissioner of Central Excise, Meerut reported at 2005-TIOL-118-SC-CX, wherein the court held as under:

“28. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. vs. Collector of Central Excise, Bombay, [1995 Suppl. (3) SCC, 462], we find that "suppression of facts" can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty, when facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the noticee to find willful suppression . Therefore, in view of our findings made herein above that there was no deliberate intention on the part of the Noticee not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in proviso to section 11A of the Act. We are, therefore, of the firm opinion that where facts were known to both the parties, as in the instant case, it was not open to the CEGAT to come to a conclusion that the Noticee was guilty of "suppression of facts”…..”

It is humbly submitted that the Hon’ble Supreme Court in the case of Padmini Products Limited v CCE reported at 1989 (43) ELT 195 (SC) held as follows in this regard:

“It was observed by this Court that something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate

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withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability beyond the period of six months had to be established. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful mis-statement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case.”

The Apex Court in the case of CCE v. Chemphar Drugs & Liniments 1989 (40) ELT 276 (SC), held as follows:

“In our opinion, the order of the Tribunal must be sustained. In order to make the demand for duty sustainable beyond a period of six months and up to a period of 5 years in view of the proviso to sub-section HA of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or wilful misstatement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case. The Tribunal came to the conclusion that the facts referred to hereinbefore do not warrant any inference of fraud. The noticee declared the goods on the basis of their belief of the interpretation of the provisions of the law that the exempted goods were not required to be included and these did not include the value of the exempted goods which they manufactured at the relevant time.”

13.10.6 The above-mentioned judgments were followed in the cases of Gopal Zarda Udyog v. CCE 2005 (188) ELT 251 (SC) and Lubri-Chem Industries Ltd. v. CCE 1994 (73) ELT 257 (SC) upholding the same view.

13.11 Penalty is not imposable – The noticee has submitted that the imposition of penalty under Section 77 & 78 of the Finance Act, 1994 does not arise as the above is a question of interpretation of law and there was no intention to evade payment of duty. For this reason also, no penalty can be imposed on them.

13.12 No penalty under Section 77 is applicable - The noticee further submits that no penalty can be imposed under Section 77 of the Finance Act, 1994 as none of the conditions specified therein have been met. The noticee explains that they did not fail to keep, maintain or retain the books of accounts and other documents as required under the provisions of the Finance Act, 1994. In fact there is no allegation in the show cause notice to this regard. Therefore clause (b) is also not applicable. That they did not fail to provide any information to the department or produce documents or appear before the department on inquiry. In fact there is no allegation in the show cause notice to this effect. Thus clause (c) is also not applicable. There is no allegation that the noticee has failed to pay service tax electronically. Thus clause (d) is also not applicable. There is also no allegation that the noticee has issued invoices not in accordance with the provisions of the Finance Act, 1994 or the Rules made thereunder. Thus clause (e) is also not applicable. Therefore, the demand raised under Section 77(1)(e) of the show cause notice is bad in law. Thus it is clear that none of the conditions of Section 77 are satisfied and therefore the proposal to levy penalty under Section 77 is without basis and does not stand scrutiny.

13.13 No penalty under Section 78 is applicable – The noticee has further submitted that for imposing penalty under Section 78 of the Act, there should be an intention to evade payment of service tax, or there should be suppression or concealment of material facts. The noticee has provided all the details as and when desired by the department vide the letters to the Department and the noticee at no point of time had the intention to evade service tax or suppressed any fact wilfully from the knowledge of the department.

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13.13.1 Further, the noticee was and still is of the bona-fide belief that the valuation computed by the Department under renting of immovable property is erroneous and in principle with the legislative intent for which the category was introduced in Finance Act. Thus what is known to the whole world cannot be considered to have been suppressed. Reliance is placed upon the decision of the Hon’ble Tribunal in Electrical Mfg. Co. P. Ltd. v. CCE reported at 1989 (40) ELT 472 [Affirmed by the Hon'ble Supreme Court in 1996 (83) ELT A44] to this effect.

13.13.2 The noticee inter alia places reliance upon the following decisions to submit the information is available on record and, no suppression can be alleged on the noticee;(a) Suvikram Plastex Pvt. Ltd. v. CCE, Bangalore – III 2008 (225) ELT 282 (T)(b) Rallis India Ltd. v. CCE, Surat 2006 (201) ELT 429 (T)(c) Patton Ltd. v. CCE, Kolkata – V 2006 (206) ELT 496 (T)(d) CCE, Tirupati v. Satguru Engineering & Consultants Pvt. Ltd. 2006 (203) ELT 492 (T)(e) Indian Hume Pipes Co. Ltd. v. CCE, Coimbatore 2004 (163) ELT 273 (T)

13.3.3 It is further submitted that penalty under Section 78 of the Act can be imposed only if the noticee suppresses any information from the department. However, the noticee has not suppressed any fact with an intention to evade payment of service tax. Therefore, penalty under Section 78 of the Act cannot be imposed in the present case. Reliance is placed on the judgment of the Hon’ble Supreme Court in the case of Akbar Badruddin Jiwani v. Collector of Customs reported at 1990 (047) ELT 0161 SC, wherein the Hon’ble Supreme Court has held as follows:

57. Before we conclude it is relevant to mention in this connection that even if it is taken for arguments sake that the imported article is marble falling within Entry 62 of Appendix 2, the burden lies on the Customs Department to show that the Appellant has acted dishonestly or contumaciously or with the deliberate or distinct object of breaching the law.

Similarly, it has been held by the Hon’ble Supreme Court that there can be no suppression when the department had knowledge of what the noticee was doing. Reliance is placed on the judgment of the Hon’ble Supreme Court in the case of Pushpam Pharmaceuticals Company v. CCE reported at 1995 (78) ELT 401 (SC) wherein it was held as follows:

4. Section 11A empowers the Department to re-open proceedings if the levy has been short levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different then what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.

Also in CCE v. Chemphar Drugs and Liniments reported at 1989 (40) ELT 276 (SC), it was held as follows:

8. Aggrieved thereby, the revenue has come up in appeal to this Court. In our opinion, the order of the Tribunal must be sustained. In order to make the demand for duty sustainable beyond a period of six months and upto a period of 5 years in view of the proviso to sub-section 11A of the Act, it has to be established that the duty of excise has not been levied or paid or short-levied or short-paid, or erroneously refunded by reasons of either fraud or collusion or willful misstatement or suppression of facts or contravention of any provision of the Act or Rules made thereunder, with intent to evade payment of duty. Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any

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liability, before the period of six months. Whether in a particular set of facts and circumstances there was any fraud or collusion or willful misstatement or suppression or contravention of any provision of any Act, is a question of fact depending upon the facts and circumstances of a particular case. The Tribunal came to the conclusion that the facts referred to hereinbefore do not warrant any inference of fraud. The noticee declared the goods on the basis of their belief of the interpretation of the provisions of the law that the exempted goods were not required to be included and these did not include the value of the exempted goods which they manufactured at the relevant time. The Tribunal found that the explanation was plausible, and also noted that the Department had full knowledge of the facts about manufacture of all the goods manufactured by the respondent when the declaration was filed by the respondent.

13.13.3 It is therefore submitted that there being no suppression, penalty under Section 78 is not applicable as none of the five conditions for imposition of penalty under Section 78 are applicable. There is no fraud; collusion; wilful mis-statement; suppression; or contravention of the provisions of Finance Act, 1994 with an intent to evade payment of duty in the present case. Further, the noticee has clearly stated that there is no suppression in the present case and also that there is no contravention of the provisions of Finance Act, 1994 with an intent to evade payment of duty and crave leave to rely on the submissions made to that effect. It is submitted by the noticee that the proposal to impose penalty under Section 78 is without legal basis and liable to be set aside.

13.13.4 Issue involves bona fide interpretation of law – According to noticee, the present issue involves interpretation of complex legal provisions. Therefore, imposition of penalty is not warranted in the present case. In this regard, the noticee has placed reliance on the following judgments:

(i) Ispat Industries Ltd. v. CCE 2006 (199) ELT 509 (Tri.-Mum)(ii) Secretary, Twon Hall Committee v. CCE 2007 (8) S.T.R. 170 (Tri. - Bang.)(iii) CCE v. Sikar Ex-serviceman Welfare Coop. Society Ltd. 2006 (4) S.T.R. 213 (Tri. -

Del.)(iv) Haldia Petrochemicals Ltd. v. CCE 2006 (197) E.L.T. 97 (Tri. - Del.)(v) Siyaram Silk Mills Ltd. v. CCE 2006 (195) E.L.T. 284 (Tri. - Mumbai)(vi) Fibre Foils Ltd. v. CCE 2005 (190) E.L.T. 352 (Tri. - Mumbai)(vii) ITEL Industries Pvt. Ltd. v. CCE 2004 (163) E.L.T. 219 (Tri. - Bang.)

Hence, no penalty is imposable and the impugned order is liable to be set aside on this ground itself.

13.13.5 No intent to evade - The noticee places reliance upon the decision of the Hon'ble Supreme Court in Hindustan Steel Ltd. v. State of Orissa reported in AIR 1970 SC 253 wherein it was inter alia observed as under;

But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An Order imposing penalty for failure to carry out a statutory obligation is the result of quasi-criminal proceedings, and the penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Where penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the Statute.

13.13.6 The above decision of the Apex Court was followed by the Tribunal in the case of Kellner Pharmaceuticals Ltd. v. CCE reported in 1985 (20) ELT 80, and it was held that proceedings under Rule 173Q are quasi-criminal in nature and as there was no intention on the part of the noticee to evade payment of duty the imposition of penalty cannot be justified.

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13.13.7 The noticee has contended that the ratio of these decisions applies in all force to the present case. In the present case, there was no intention of the noticee to evade payment of tax as the law itself provided that no service tax is leviable on the amount invested by ESPL for up gradation of Stadium. Whatever the information required was to be shown or presented to the department, the noticee has done the same. In any case all the information was always available with the department both through public domain and the information as supplied from time to time by them. Hence, no penalty can be imposed on them.

13.14. Section 80 of the Finance Act, 1994 is in their favour - The noticee submits that Section 80 of the Act provides that no penalty shall be imposed on the noticee for any failure referred to in sections 77 or 78 of the Act, if the noticee proves that there was reasonable cause for the said failure. Thus, the Act statutorily provides for waiver of penalty. In the present case, there was a bonafide belief on part of the noticee that the impugned activities were not subject to service tax, based on the detailed grounds given above. Therefore, there was reasonable cause for failure, if any, on part of the noticee to pay service tax and to file service tax return. Hence, in terms of section 80 of the Act, penalties cannot be imposed under Sections 77 and 78 of the Act. In this regard, reliance is placed on the following judgments:(i) ETA Engineering Ltd. vs. CCE, Chennai, 2004 (174) E.L.T 19 (T-LB)(ii) Flyingman Air Courier Pvt. Ltd. vs. CCE 2004 (170) ELT 417 (T)(iii) Star Neon Singh vs. CCE, Chandigarh, 2002 (141) ELT 770 (T)

13.15 It is also submitted by the noticee that when no tax liability arises, no question of interest is left for determination. For this reason, the proposal made in the show cause notice demanding interest under Section 75 of the Finance Act, 1994 is not sustainable and liable to be set aside.

13.16 The noticee has prayed for dropping the proceedings.

13.17 Personal Hearing – Personal hearing in the case was held on 17.6.2014. The noticee was represented by Ms Madhu Jain, Advocate. She gave compilation on various case laws viz Inox Air Products vs CCE and Bhayana Builders vs CST and explained the same. The representative was asked to submit reply to the show cause notice alongwith other evidence/ documentary proof in their favour. Noticee’s reply has been received on 27.6.2014.

DISCUSSION & FINDINGS -

14. I have carefully gone through the show cause notice and submissions made by the noticee in their written submissions dated 27.6.2014. I have also considered the arguments made by the noticee’s representative during personal hearing. The noticee is a civic authority of Ahmedabad city and as submitted by them in their defence reply, they constructed the Sardar Patel Stadium, Navrangpura (Ahmedabad) for use in promotion and development of game of cricket and other sports. The noticee entered into a licensing agreement with M/s Essel Sports Private Limited, Mumbai (ESPL) for use of the stadium as a venue to host some matches of Indian Cricket Legue (ICL) for a minimum period of 10 years. As per terms of agreement, M/s ESPL were required to pay the noticee an all inclusive sum of Rs.12 lakh in four equal installments of Rs.3 lakh each, every quarter in advance, per year of usage. In addition, however, M/s ESPL were also required to develop, upgrade and renovate the stadium at a onetime cost of Rs.10 crore, and on expiry of the licence term, all the moveable and immovable assets and temporary renovations made by them during the terms of agreement would belong to the noticee. As per SCN, the services provided by the noticee in the form of leasing out the stadium to M/s ESPL were taxable under the category of ‘renting of immovable property service’ under sub-clause (zzzz) of Section 65(105) of the Finance Act, 1994 and the amount of

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Rs.10 crore spent by M/s ESPL towards development, up-gradation, etc. of the stadium was liable to be taxed as a consideration against provision of service by the noticee, along-with licence fee of Rs.12 lakh per annum.

14.1 From the details available in the SCN and defence reply filed by the noticee, I observe that the noticee received Rs.12 lakh for the first year of the agreement, i.e., from 1.9.2008 to 31.8.2009. M/s ESPL did not pay any rent thereafter and the licence agreement was terminated by the noticee on 10.12.2009. As no further rent was received by the noticee other than that in the first year of agreement, service tax liability on the amount of Rs.10 crore allegedly spent by M/s ESPL for up-gradation, renovations, etc. of the stadium is now the moot point to be decided in the case.

15. The SCN seeks to recover service tax on the amount of Rs.10 crore under the category of ‘renting of immovable property service’ on the ground that the consideration received by the noticee in respect of usage of stadium by M/s ESPL consisted of two parts – (i) Rs.12 lakh per annum which was to be paid directly to M/s AMC as lease rent; and (ii)Rs.10 crore which was the cost to develop, upgrade and renovate the stadium, at the time of taking over the stadium. It is alleged that the total consideration received by the noticee was not wholly consisting of money received directly but also in the form of expenditure incurred by M/s ESPL for renovation of stadium and hence, total value of Rs.10.12 crore would be the taxable value in terms of Rule 3(b) of the Service Tax (Determination of Value) Rules, 2006.

15.1 I have perused the LICENCSE AGREEMENT dated 22.8.2008 made between Ahmedabad Municipal Corporation (noticee) and Essel Sports Private Limited (M/s ESPL) and as per clause 3(B) of the agreement ESPL shall develop, upgrade and renovate the stadium at the time of taking over the stadium and shall bear a one time cost of approximately Rs.10,00,00,000/- (Rs. Ten Crore only). Further, it is clarified that all moveable and immovable assets and / or temporary renovations made by ESPL during the term of the agreement shall belong solely and exclusively to AMC, on expiry of the licence Term. So this part of the agreement makes it abundantly clear that ESPL was required to develop, upgrade and renovate the stadium at the time of taking over the stadium and the approximate cost of Rs. 10 crore for this was to be borne by ESPL. However, moveable and immovable assests/ temporary renovations made by ESPL would belong solely and exclusively to AMC on expiry of the licence term.

15.2 After reading the agreement, specifically the aforesaid clause 3(B), I note that the lease rent of Rs.12 lakh per annum fixed in the agreement for use of the stadium is not in isolation. It definitely has a link with the likely appreciation / addition in the assets of the stadium as a result of its development, upgradation and renovation, the cost of which was to be borne by ESPL. The likely expense of Rs.10 crore had a bearing on the lease rent decided in the agreement. One should not fail to visualize a situation where M/s ESPL instead of spending Rs. 10 crore himself, would have asked for an upgraded and renovated stadium involving an expenditure of Rs. 10 crore to the noticee. In such a situation, the noticee would have definitely demanded much more than Rs.12 lakh as lease rent. I am therefore of the view that the amount to be spent by M/s ESPL towards development, upgradation and renovation of the stadium was a significant additional consideration for leasing out the stadium and should form a part of total value of services provided by the noticee, in terms of Rule 3(b) of the Service Tax (Determination of Value) Rules, 2006, which reads as follows –

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3. Manner of determination of value– Subject to the provisions of section 67, the value of taxable service, where such value is not ascertainable, shall be determined by the service provider in the following manner:– (a) the value of such taxable service shall be equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the gross amount charged is the sole consideration;

(b) where the value cannot be determined in accordance with clause (a), the service provider shall determine the equivalent money value of such consideration which shall, in no case be less than the cost of provision of such taxable service.

15.3 Here, since cost involved in development, upgradation and renovation of the stadium had a bearing on deciding the lease rent, it can be said that monetary consideration in the form of a lease rent of Rs.12 lakh per annum was not the only consideration. The value of taxable service in such a situation was to be determined in the manner provided in Rule 3 of the Service Tax (Determination of Value) Rules, 2006. Further, equivalent value of similar service in the ordinary course of trade is also not ascertainable in this case, sub-rule (a) of Rule 3 ibid was inapplicable. And where sub-rule (a) is inapplicable, the equivalent money value of additional consideration but not less than the cost of provision of service shall be the taxable value in terms of sub-rule (b) ibid. The equivalent value of additional consideration is the money spent in development, upgradation and renovation of the stadium by M/s ESPL. Therefore, the correct taxable value in this case has to be inclusive of Rs.10 crore spent by M/s ESPL for development, upgradation, renovation, etc. of the stadium. Accordingly, the noticee was required to discharge the service tax liability on the value of Rs.10.12 crore (sum of Rs. 10 crore spent by ESPL and lease rent of Rs.12 lakh) and not on Rs.12 lakh received by the noticee as lease rent for the first year of agreement. 15.4 As far as the category of service under which demand has been raised is concerned, there should not be any dispute. The renting of stadium for hosting cricket matches is duly covered under the definition of ‘renting of immovable property’ as defined under Section 65 (90a) of the Finance Act, 1994 and renting of immovable property service during material time was taxable under Section 65(105)(zzzz) of the Finance Act, 1994. Further, the value of Rs.10 crore would also be covered under the same service as it is in relation to the same activity of renting of stadium and not for some other activity.

16. Now, I come to the contentions made by the noticee in their defence.

16.1 Show cause notice is vague and cryptic – According to noticee, the SCN does not indicate as to under which part of the definition of taxable service the activity undertaken by them falls so as to be taxed by the department. Also, they stated that the amount spent by ESPL on upgradation of Stadium is shown to be Rs.6,10,13,364/-, whereas demand has been calculated on Rs.10 crore which is not spent by ESPL.

16.1.1 I do not agree with the noticee’s contention as the demand has been raised under the category of ‘renting of immovable property service’. That demand has been made under this category of service is clearly seen in the SCN. There is no ambiguity with regard to category of service under which the services provided by the noticee are

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proposed to be taxed. The stadium was leased out to ESPL for commercial purposes and such an activity is supposed to be covered under renting of immovable property service as defined under Section 65(90a) of the Finance Act, 1994. The SCN cannot be said to be cryptic and vague and charges made therein are detailed and lucid. As far as calculation of demand is concerned as to how it has been calculated on the value of Rs.10 crore when only Rs.6.10 crore was spent by ESPL is being discussed in the later part of this discussion.

16.2 Gross amount charged by the service provider as consideration would be the taxable value on which service tax needs to be paid – According to noticee, the phrase ‘gross amount charged’ is to be interpretated in the context of Section 67 of the Act and the expression can include only the amount which is charged by the service provider. The consideration which is not received by the service provider in any form or has not accorded any benefit to the service provider will not form part of the gross amount charged for levy of service tax. Consequently, the value of service provided would be equal to consideration asked for by the service provider and that would depend upon the terms of the contract between the parties.

16.2.1 I am in total disagreement with the noticee here as the Section 67 and Service Tax (Determination of Value) Rules, 2006 speak for themselves. Section 67 and Service Tax (Determination of Value) Rules, 2006 also cover the situations where consideration is not consisting of money or consideration is not known. Where consideration is not ascertainable under Section 67 of the Act, the value has to be determined as specified in Service Tax (Determination of Value) Rules, 2006. Another point raised by the noticee that the consideration has not accorded any benefit to the service provider to be considered as the part of taxable value is devoid of merit as noticee has very much benefitted from the amount spent by service recipient. The renovated property (stadium) would finally belong to the noticee and therefore entire benefit of renovation, upgradation, etc. will ultimately pass on to the noticee. This is all clearly documented in the agreement and it is wrong to say that the noticee would not derive any benefit out of cost incurred by the service recipient.

16.2.2 With regard to reliance of the noticee on the Tribunal’s order in case of M/s Bhayana Builders (P) Ltd vs CCE reported at 2013(032) STR 49 Trib.LB, I find that as per Hon’ble Tribunal’s order value of taxable service shall be the gross amount charged by the service provider; nothing more and nothing less than the consideration paid as a quid pro quo for the service can be brought to charge. I completely agree with the statement that nothing more nothing less than the consideration paid as a quid pro quo can be charged to service tax, but this is exactly the proposal here. The amount agreed to be spent by the service recipient on development, upgradation, etc. of the stadium is nothing but quid pro quo to the noticee and it had a bearing on deciding the lease rent payable by the service recipient. And equivalent money value of quid pro quo requires to be added to the lease rent received by the noticee so as to arrive at the correct value of consideration against services provided. Thus, the decision quoted by the noticee is not in their favour.16.2.3 I have also perused the case law of Inox Air Products Ltd vs Commissioner of Central Excise, Nagpur reported in 2014-TIOL-803-CESTAT-MUM cited by the assessee. In this case, the appellant was engaged in setting up of air separation plant at the customer’s premises. The operation and maintenance of the plant was with appellant and the dispute arose with regard to valuation of service of operation and maintenance

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provided by the appellant. The electricity required for operation of the air separation plant was supplied by the customers for which the appellant was not paying any separate charges. The service charges of the appellant varied depending on consumption of electricity. Revenue wanted to add the price of electricity for determining the taxable value for the purpose of service tax. Hon’ble Tribunal held that electricity cannot be considered as an input for providing the services of operation of air separation plant and it cannot be considered as an additional consideration flowing to the appellant. So, here the issue was of adding value of free supply of electricity made by the service recipient for use in providing services by the appellant. In the instant case, the service recipient has incurred expenditure towards upgradation and renovation of the property (stadium) leased out by the service provider benefitting the service provider in terms of enhancement of value of the property. The cost incurred by the service recipient has added to the value of the property rented thereby influencing the lease amount agreed upon between the service provider and service recipient, which leads to the inference that the cost incurred was in relation of provision of service provided. The case law cited by the assessee, therefore, covers a situation different from that involved in the instant case, hence does not help the assessee.

16.3 Service recipient’s amount invested for renovation and upgradation of Stadium is not additional consideration – The noticee has argued that for anything to be called as consideration for the service provider, it must be a benefit which is passed on by the service recipient to the service provider and that the upgradation of Stadium by the service recipient for its own use is not a consideration for the services provided by the service provider.

16.3.1 As already discussed in the paragraph 16.2, upgradation of the stadium by the service recipient has benefitted the noticee and it has worked as a quid pro quo for the noticee. Accordingly, the amount spent by the service recipient is a consideration for the service provider.

16.4 Contractual supply is essence of service tax – As per noticee, the consideration accruing to service provider under the contractual arrangements alone is liable to service tax. The service provider puts in its labour and skill for providing service to the service receiver and depending upon this, it asks for consideration for its service. Thus, the value of service would depend strictly upon the terms of the contract between the parties.

16.4.1 It is true that contractual arrangement between the service provider and service recipient is essence of the consideration for charging service tax, however, in the present case contract itself indicates that there was a quid pro quo which had a bearing in arriving at the lease rent for the property leased out. The terms of the contract are very clear and the expenses made by the service recipient did benefit the noticee in terms of upgraded and renovated property. Hence, consideration as reflected in the contract/ agreement only is being made liable to service tax and nothing beyond that.

16.5 Taxable value of Rs.10 crore cannot be made taxable under the category of ‘renting of immovable property’ service – As per noticee, the amount received by the noticee for providing right to use of immovable property would be leviable to service tax under immovable property service. No other amount was received by them which can be made taxable under the category of renting of immovable property

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service. They stated that the amount invested by ESPL at Stadium to hold cricket matches is meant for its own purpose and by no stretch of imagination it can be made taxable under the category of renting of immovable property service.

16.5.1 As already discussed, the amount invested by ESPL for upgradation of stadium was adding value to the property (stadium), though during the period of agreement the property was to be used by ESPL. In case M/s ESPL had chosen not to spend the money himself, the noticee would have incurred that much expenditure to upgrade and renovate the stadium and that would have definitely been a factor in arriving at the amount of lease rent to be charged by the noticee. The upgradation and renovation of stadium cannot be viewed in complete isolation as it is through the stadium that the noticee was providing service to M/s ESPL and an upgraded and renovated stadium with more facilities would definitely fetch higher rent for the noticee. Hence, lease rent for the stadium was fixed as Rs.12 lakh per annum, but the benefits involved and accruing to the noticee in upgradation and renovation of the stadium are liable to be accounted while working out the taxable value in terms of Service Tax (Determination of Value) Rules, 2006.

16.6 As out of Rs.10 crore, ESPL has invested Rs.6.1 crore for upgradation of Stadium by availing services of other contractors, demand cannot be raised on the noticee on the said amount – As per noticee, out of Rs.6,10,13,364/- spent by ESPL, Rs.5,38,77,830/- was utilized for purchase and installation of sports flood lighting system for which ESPL took services of Dev Musco Lighting P Ltd, the service tax liability arises upon the contractors and not upon them.

16.6.1 I find that the noticee’s argument is misdirected as the service tax demanded in the SCN is not in respect of any services provided by M/s ESPL so as to deflect the liability from ESPL to the contractors who carried out works for ESPL. The service provider is none other than the noticee for renting of stadium is concerned. It is valuation of services provided which is not correctly made by the noticee. A substantial part of consideration against provision of services was not taken into account for the purpose of payment of service tax by the noticee and that is exactly the dispute involved in the matter. The services provided by ESPL or received by ESPL is not relevant in the present matter. If there is any tax liability on the contractors of ESPL, that is a separate issue and this argument does not come to help the noticee in any manner.

16.7 Quantification of demand is incorrect – The amount spent by ESPL is only Rs.6,10,13,364/-, whereas demand has been calculated on Rs.10 crore. The noticee has argued that without assigning any reason, department has made the unutilized amount as part of the taxable value which is not even spent by ESPL for upgradation of Stadium.

16.7.1 I observe that the total demand of Rs.1,24,89,780/- in the SCN has been worked out on a value of Rs.10,12,00,000/- (Rs.10.12 crore), which is a sum of lease rent for a year and Rs.10 crore spent by M/s ESPL on upgradation, renovation, etc. of the stadium. As shown in Annexure-A to the SCN, lease rent of Rs.12 lakh is shown received from 1.9.2008 to 31.8.2009 (12 months) and Rs.10 crore is shown to be expenditure during 1.9.2008 to 20.10.2008. I further observe from para 6.3.1 of the SCN that M/s ESPL had spent Rs.6,10,13,364/- on upgradation of stadium till 31.3.2010 as per documents supplied by them during investigation, and major part this expenditure (Rs.5,38,77,830/-) was on ‘flood light fixures’ and this part of the work was performed

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by M/s Dev Musco Lighting P Ltd, Delhi. There is nothing in the SCN which evidences that the expenditure made by ESPL was of Rs.10 crore. It appears that the figure of Rs.10 crore is based on presumption that since the stadium was to be handed over to ESPL after spending about Rs.10 crore, M/s ESPL must have spent Rs.10 crore as 10 ICL matches were played in the stadium between 18.10.2008 to 13.11.2008. This being a pure presumption not supported by any evidence, the amount of Rs.6,10,13,364/- only can be considered as the additional consideration for inclusion in the taxable value and not Rs.10 crore. The service tax liability accordingly needs to be reworked as follows-

Re-calculation of service tax payable, considering amount spent by ESPL as Rs.6,10,13,364/-Period Amount of

lease rent received (Rs.)

Amount spent by ESPL on development, upgradation & renovations of stadium (Rs.)

Rate of service tax, including edu.cess & Sec Edu & Higher Edu cess (%)

Service tax payable, including edu.cess & Sec Edu & Higher Edu cess (Rs.)

Service tax paid, including edu.cess & Sec Edu & Higher Edu cess (Rs.)

Remarks

1.9.08 to 30.11.08

3,00,000 0 12.36 37,080 1,12,059 Interest of Rs.13,809/- paid for delayed payment.

1.12.08 to 28.2.09

3,00,000 0 12.36 37,080 0

1.3.09 to 31.8.09

6,00,000 0 10.30 61,800 0

Total of service tax payable & paid on lease rent of Rs.12 lakh 1,35,960 1,12,0591.9.08 to 20.10.08

0 6,10,13,364 12.36 75,41,252 0

Service tax payable & paid on amount spent by ESPL 75,41,252 0

Total amount of service tax payable on lease rent and the amount spent by ESPL Rs.76,77,212/-Amount of service tax already paid Rs.1,12,059/-Amount of service tax not paid Rs.75,65,153/-

In view of above re-calculation, the service tax payable by the noticee is quantified to be Rs.76,77,212/- against which an amount of Rs.1,12,059/- stands paid. An amount of Rs.75,65,153/- still remains to be paid by the noticee.

16.8 The entire exercise is revenue neutral – As per noticee, since credit of service tax is available to them, the exercise will be revenue neutral in view of larger bench’s decision in the case of Jay Yushin – 2000(119) ELT 718 (Tri.-LB).

16.8.1 The noticee has claimed revenue neutrality, however, revenue neutrality cannot be a matter of practice. The larger bench of the tribunal in the case of Jay Yuhshin Ltd cited by the noticee has held that revenue neutrality being a question of fact, the same is to be established in the facts of each case and not merely by showing the availability of an alternate scheme. Thus, whether a particular case involves revenue neutrality or not depends on the facts of that case. Here, the noticee has stated that credit of service tax payable by them would be available to them, the exercise is revenue neutral. Since it is not clear as to how credit of the tax payable would be available to the noticee as it would depend on many more facts, and since the noticee has not elaborated on such facts which would enable them to avail credit, I cannot conclude that this is a case of revenue

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neutrality. The noticee’s plea of revenue neutrality, therefore, is not acceptable.

16.9 Computation of liability is incorrect – The noticee has argued that the consideration which they have received is inclusive of service tax, hence manner of calculation of liability is not correct.

16.9.1 I observe that the noticee has claimed the benefit of cum tax value by stating that consideration was inclusive of service tax. It cannot be disputed that where value of service provided is inclusive of service tax, benefit of cum tax may arise as envisaged in Section 67 of the Finance Act, 1994, which says that where the gross amount charged by a service provider, for the services provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. To claim such a benefit in respect of Rs.6,10,13,364/-, which is in the nature of an additional consideration, is not in line with the said provision. Cum tax benefit is allowable only when there is evidence in the form of contracts/ agreements that the value to be paid against services is inclusive of service tax. This not being the case here, I find the noticee’s argument unacceptable.

16.10 Demand barred by limitation – The noticee has contested the charge of suppression of facts with intent to evade payment of service tax and consequent invocation of extended period of limitation. The noticee has submitted that there must be a positive act on part of the noticee to withhold or hide the facts from the department with a view of evade payment of tax for alleging suppression of facts and mere non payment of service tax is not enough.

16.10.1 The demand raised in the SCN is in terms of proviso to Section 73(1) of the Finance Act, 1994 which provides for an extended period of FIVE years where failure in payment of service tax is by reason of fraud; or collusion; or willful misstatement; or suppression of facts or contravention of provisions of Chapter V of the Finance Act, 1994 or rules made thereunder with intent to evade payment of service tax. The noticee in spite of being registered with the service tax under the category of ‘renting of immovable property service’ failed in statutory obligation of declaring the correct value of services provided by them in their ST-3 returns. The noticee by not declaring the value in statutory returns has suppressed the material facts from the department. Moreover, the fact of non-payment of applicable service tax on such undeclared value points towards the noticee’s intention of evasion. I, therefore, find that the present case is the case of non-payment of service tax by reason of suppression of facts with intent to evade payment of service tax and hence proviso to Section 73(1) is rightly applicable and demand raised in the SCN cannot be termed as time barred.

16.11 I, thus find that the services provided by the noticee were taxable during relevant period and the noticee was liable to pay the service tax of Rs.76,77,212/- on the taxable value of Rs.6,22,13,364/- (Rs.12,00,000/-+ Rs.6,10,13,364/-) under the category of ‘renting of immovable property service’. As the noticee has failed to discharge the tax liability, the same is liable to be recovered from them under proviso to Section 73(1) of the Finance Act, 1994. Further, Section 75 of the Finance Act, 1994 provides for payment of interest for delayed payment of service tax, I also find the noticee liable to pay interest on Rs.76,77,212/- in terms of Section 75 ibid. The amount of service tax and interest already paid by the noticee, however, need to be deducted from the respective liabilities.

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17. Penalty not imposable under Section 77 and 78 –

17.1 In the SCN, penalty under sub-section 1(b), 1(c)(i), 1(c)(ii) and sub-section 2 of Section 77 of the Finance Act, 1994 has been proposed to be imposed. Penalty under sub-section 1(b) is proposed to be imposed for failure to keep, maintain books of accounts and other documents as required under the provisions of the Finance Act, 1994 or rules made there-under. Penalty under sub-section (c)(i) is proposed to be imposed for failure to furnish information called by an officer in accordance with the provisions and penalty under sub-section (c)(ii) is for failure to produce documents called for by an officer in accordance with the provisions.

17.1.1 I observe from the SCN that though penalty under aforesaid sub-sections of Section 77 has been proposed to be imposed on the noticee, there are no specific allegations as to how the noticee failed to follow the prescribed provisions. To make the noticee liable to penalty under sub-section (1)(b), allegation of failure to keep, maintain books of accounts and other documents as required under the relevant provisions is not clear as to where the failure lied. Similarly, it is not forthcoming in the SCN as to what information called for by an officer was not supplied by the noticee and what documents the noticee did not produce when demanded by an officer. As the requisite details to conclude the contraventions are not available in the SCN, the noticee cannot be made liable to penalty under sub-section (1)(b), (1)(c)(i) and (1)(c)(ii) of Section 77 of the Finance Act, 1994.

17.1.2 With regard to penalty proposal under sub-section (2) for contravention of provisions of Section 70 of the Finance Act, 1994 by failing to self assess the tax liability on services provided by them, I find that there is incorrect assessment of the tax liability by the noticee and also there is non-declaration of correct details in their ST-3 returns, which is in contravention of the provisions contained in Section 70 of the Finance Act, 1994 that a every person liable to pay the service tax shall himself assess the tax due on the services provided by him. I, therefore, find the noticee liable to penalty under sub-section 2 of Section 77 of the Finance Act, 1994.

17.1.3 With regard to penalty proposal under Section 78 of the Finance Act, 1994, I find that Section78 lays down the provision of imposing penalty where any service provider fails to levy or pay any service tax or short levies or short pays or gets erroneous refund by reason of fraud, collusion, wilful mis-statement, suppression of facts or contravention of any of the provisions with intent to evade payment of service tax. The noticee, as discussed in earlier paragraphs, has failed to discharge the service tax liability of Rs.76,77,212/- by way of suppression of facts with intent to evade payment of service tax. The penal provisions of Section 78 therefore get attracted in the present case and the penalty prescribed in Section 78 is liable to be imposed on the noticee.

17.2 The noticee has also claimed waiver of penalties proposed to be imposed under Section 77 and 78 in terms of Section 80 of the Finance Act, 1994 stating that the benefit under the said section available to them as there was a bonafide belief on their part that the impugned activities were not subject to service tax and therefore, there was reasonable cause for failure, if any, to pay service tax. I do not find the noticee’s contention good enough to grant waiver of penalties in terms of Section 80 as a belief cannot be a substitute for evidence and there has to be some evidence that the noticee was

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prevented from payment of service tax and observing the prescribed provisions. I do not find any reasonable cause for failure in this case and therefore, I am not inclined to waive penalties by invoking Section 80 of the Finance Act, 1994.

18. I view of foregoing discussion and findings, I pass the following order –

O R D E R

(i) I consider the amount of Rs.6,22,13,364/- (Rs.12,00,000/-+ Rs.6,10,13,364/-) as taxable value for providing services under the category of ‘renting of immovable property service’ and order to recover the service tax of Rs.76,77,212/- from the noticee under proviso to Section 73(1) of the Finance Act, 1994. The amount of Rs.1,12,059/- already paid by the noticee is to be appropriated against the total liability of Rs.76,77,212/-. The remaining demand of Rs.48,12,568/- (Rs.1,24,89,780 – Rs.76,77,212) raised in the SCN stands dropped.

(ii) I order to recover interest from the noticee on the aforementioned service tax amount of Rs.76,77,212/- in terms of Section 75 of the Finance Act, 1994. The amount of Rs.13,809/- already paid is to be appropriated against the total interest liability.

(iii) I impose a penalty of Rs.5,000/- on the noticee under Section 77(2) of the Finance Act, 1994. I, however, do not impose any penalty under Section 77(1)(b), 77(1)(c)(i) and 77(1)(c)(ii) of the Finance Act, 1994.

(iv) I impose a penalty of Rs.76,77,212/- on the noticee under section 78 of the Finance Act, 1994. In the event of the noticee opting to pay the amount of service tax along with all other dues as confirmed and ordered to be recovered, within thirty days from the date of communication of this order, the amount of penalty under Section 78 of the Finance Act, 1994 shall be 25% of the said amount and the benefit of reduced penalty shall be available only if the amount of penalty is also paid within the period of thirty days from the communication of this order, otherwise full penalty shall be paid as imposed in the above order.

(Tejasvini P. Kumar)Commissioner

Service Tax Ahmedabad

F.No.STC/4-14/O&A/12-13 Date:

By Regd. Post A.D.

To,M/s. Ahmedabad Municipal Corporation, Sardar Patel Bhuvan, Danapith, Ahmedabad- 380001 Copy to:

(1) The Chief Commissioner, Central Excise, Ahmedabad Zone, Ahmedabad.(2)The Additional Commissioner of Service Tax (Prev.), Ahmedabad.(3)The Deputy Commissioner, Div-III, Service Tax, Ahmedabad.(4)The Superintendent, Service Tax, Range XV, Div-III, Ahmedabad

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(5)The Guard File