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2010-TIOL-1715-CESTAT-DEL 

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL

WEST BLOCK NO.2 , R K PURAM , NEW DELHI

COURT NO.I

Service Tax Appeal No.776 of 2009

Arising out of the order in original No.25 / PKJ / CCE / ADJ /09 Dated: 27.7.2009Passed by the Commissioner of Central Excise, New Delhi.

Date of decision: 20.12.2010

M/s JETLITE (INDIA) LIMITED

Vs

CCE , NEW DELHI

Appellants Rep by: Shri S K Bagaria , Sr. Adv. with Tarun Gulati , Adv., Suman Jyoti ,Adv., Mr R A Rana , Adv., Rishi Maheshwari , Mrinal Majumdar , Adv., Ms Asmita Nayak ,

Adv., Nitya Bagaria , Adv. and K Ghosh Kunal , Adv.

Respondents Rep by: Shri Sumit Kumar with G S Saroj , DD Sunil Joshi, I O., RakeshMohan, I O, ADR ( DRs )

CORAM: R M S Khandeparkar , PresidentRakesh Kumar, Member (T)

Service Tax – BAS – Promoting Real Estate in the Air - Displaying logo of Saharawhich sells houses, is not BAS: sale, by itself, of immovable property, either developed

or undeveloped, or even alongwith construction therein, would not amount to rendering anyservice, either taxable or otherwise. Unless the service recipient is shown to have been

engaged in rendering some service to others and the service provider is shown to have

rendered his service for promotion or marketing of such service provided by the servicerecipient to others, the question of creating liability under the said Act in terms of Section

65(19) (ii) read with 65(105) ( zzb ) of the said Act does not arise.

Adjudicating Authority cannot travel beyond SCN ; the adjudicating authority, didtravel beyond the scope of the show cause notice while deciding the matter. The authority

below clearly erred in imposing such liability upon the appellants. Apart from traveling

beyond the scope of the show cause notice, undoubtedly, the department has failed toproduce any evidence regarding the basic ingredient of Section 65(19)(ii) of the said Act soas to justify classification of whatever activity carried out by the appellants in the form of 

display of logo being classifiable under the category of business auxiliary service.

Failure of the department to prove the charge can neither shift the burden, nor cangive any advantage to the department: It was for the department to establish the

positive effects of display of logo and it was not for the assessee to prove the negative. Theburden to establish the charge was squarely upon the department which it failed to

discharge.

It is settled law that the charge created by introducing a new entry andconsequently taxability thereupon, the question of imposing the duty

retrospectively does not arise. The statutory provision did not provide brand

promotion to be a taxable service during the relevant period: Applying the settledprinciple of law that with the introduction of new entry without any bifurcation of the old

entry and without disturbance of any old entry would disclose non inclusion of the subject of the new entry in the old existing entries to the matter in hand, it would be evidently clear

that during the relevant period the activity of promotion or marketing of logo or a brand of service of the client was not forming part of the Business Auxiliary Service.

Case Law Referred:

1. All India Federation of Tax Practitioners vs. Union of India - ( 2007-TIOL-149-SC-ST  ) 

2. Amrit Foods Metal Forging vs. Commissioner of Central Excise, U.P .- ( 2005-TIOL-164-SC-CX  ) 

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3. Assistant Commissioner of C.Ex . vs. Krishna Poduval - ( 2006-TIOL-77-HC-KERALA-ST  ) 

4. Association of Leasing and Financing Company vs. UOI - ( 2010-TIOL-87-SC-LB ) 

5. Assotech Reality (P) Ltd. vs. State of U.P - (2007-TIOL-297-HC-ALL-CT) 

6. Bharat Sanchar Nigam Ltd. vs. UOI - ( 2006-TIOL-15-SC-CT-LB ) 

7. Board of Control for Cricket Control in India vs. Commissioner- ( 2007-TIOL-684-CESTAT-MUM  ) 

8. C.C., Mumbai v. Toyo Engineering India Ltd. - ( 2006-TIOL-111-SC-CUS  ) 

9. C.C.E ., Nagpur vs. Ballarpur Industries Ltd.- ( 2007-TIOL-153-SC-CX  ) 

10. Chennai Telephones ( BSNL ) vs. Commissioner of C. Ex. Chennai - ( 2004-TIOL-53-CESTAT-

MAD ) 

11. Cosmic Dye Chemical vs. C.C.E ., Bombay - ( 2002-TIOL-236-SC-CX  ) 

12. Devi Dass Garg vs. C.C.E ., Delhi I - ( 2010-TIOL-1502-CESTAT-DEL ) 

13. Fakir Chand Gulati vs. Uppal Agencies Private Limited - ( 2008-TIOL-147-SC-MISC  ) 

14. Glaxosmithkline Pharmaceuticals Limited vs. CCE , Mumbai-IV - (2004-TIOL-786-CESTAT-

MUM) 

15. Home Solutions Retail India Limited vs. Union of India- (2009- TIOL-196-HC-DEL-ST)

16. Hotel & Restaurant Association vs. Star India Pvt. Ltd. - ( 2006-TIOL-195-SC-MISC 

 ) 

17. HPL Chemicals vs. C.C.E .- ( 2006-TIOL-37-SC-CX  ) 

18. IBM India Pvt. Ltd. Vs. Commissioner - ( 2010-TIOL-167-CESTAT-BANG  ) 

19. Indian National Shipowners Association vs. UOI - ( 2009-TIOL-150-HC-MUM-ST  ) 

20. Jet Airways (India) Ltd. vs. Commissioner of Service Tax, Ahmedabad - ( 2008-TIOL-979-

CESTAT-AHM  ) 

21. K. Raheja Development Corporation vs. State of Karnataka - ( 2005-TIOL-77-SC-CT  ) 

22. Kerala State Electricity Board vs. C.C.E ., Thiruvananthapuram - ( 2007-TIOL-226-SC-ST  ) 

23. Larsen & Toubro Ltd. Vs. State of Karnataka - ( 2008-TIOL-186-SC-CT  ) 

24. Lubri-Chem Industries Ltd. Vs. Collector - ( 2002-TIOL-430-SC-CX  ) 

25. Magus Construction Pvt. Ltd. Vs. UOI - ( 2008-TIOL-321-HC-GUW-ST  ) 

26. Padmini Products vs. C.C.E . - ( 2002-TIOL-289-SC-CX  ) 

27. Positive Packaging Industries Ltd. vs. C.C.E ., New Panvel - ( 2010-TIOL-1369-CESTAT-MUM  ) 

28. Spandrel vs. C.C.E . ( 2010-TIOL-830-CESTAT-BANG  ) 

29. State of Madras vs. Gannon Dunkerley and Co. (Madras) Ltd. - ( 2002-TIOL-493-SC-CT-LB ) 

30. Tamil Nadu Housing Board vs. C.C.E ., Madras - ( 2002-TIOL-288-SC-CX  ) 

31. Tamilnadu Kalyan Mandapam Association vs. Union of India - ( 2004-TIOL-36-SC-ST  ) 

32. Tata Consultancy Services vs. State of Andhra Pradesh - ( 2004- TIOL -87-SC-CT- LB)

33. UOI vs. Martin Lottery Agencies Ltd. - ( 2009-TIOL-60-SC-ST 

 ) 

34. UOI vs. Rajasthan Spinning and Weaving Mills - ( 2009-TIOL-63-SC-CX  ) 

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35. Zee Telefilm and M/s Star India Private Limited vs. CCE , Mumbai - (2006 TIOL-945-

CESTAT-MUM) 

FINAL ORDER NO.ST /105/2010

Per: R M S Khandeparkar :

Pursuant to the direction by the Hon'ble Delhi High Court for early disposal of this appeal,we have heard at length the learned Advocate for the appellants and the DR for the

respondent and have also perused the written submissions filed on behalf of both theparties.

2. This appeal arises from the order dated 27.7.09 passed by the Commissioner of CentralExcise, New Delhi. By the impugned order, the demand for service tax amounting to

Rs.128,92,43,724 /- has been confirmed against the appellants under Section 73 (1) of 

Finance Act, 1994 along with interest thereon in terms of Section 75 of the said Act. Equal

amount of penalty has been imposed under Section 78, besides penalty of Rs.1,000/- underSection 77 of the said Act, 1994.

3. On the basis of information received by the Department that M/s Sahara Airlines Limitedhaving its registered office at Dr. Gopaldas Bhawan , 28, Barakhamba Road, Delhi had

provided taxable service in the category of Business Auxiliary Services to its group company

M/s Sahara India Commercial Corporation Ltd. in terms of the Agreement dated 30.3.1995but had not paid service tax in respect of the consideration received from the latter, for

such services rendered by them, investigations were initiated. In the course of 

investigations, various documents came to be recovered and scrutinized, and variousstatements of the persons in the administration of the appellants company as well as in the

service recipient company came be recorded. Pursuant to the said investigation, a show

cause notice dated 28.10.2008 came to be issued to the appellants to bring them to the fold

of levy of service tax under the said Act in respect of Business Auxiliary Services stated tohave been provided by the appellants to M/s Sahara India Commercial Corporation Ltd.

herein after referred to as "Sahara Corporation", for the period from July, 2003 to January,2007 hereinafter called as "the relevant period". The same was contested by the appellantsand ultimately, 'the impugned order came to be passed. M/s Sahara Airlines Ltd. was taken

over by the appellants vide their purchase agreement dated 18.1.2006 and therefore

henceforth, the expression the appellants' shall also include and refer to "M/s SaharaAirlines Ltd," unless otherwise the context requires.

4. While confirming the demand of service tax against the appellants, the learnedCommissioner has held that the materials on record have established that Sahara

Corporation had launched various housing and real estate projects and in that respect, the

air travel passengers of Airlines were sought to be targeted as the potential customers and

for that purpose, the Agreement dated 30.3.1995 was entered into between Sahara

Corporation and the appellants in order to promote business of Sahara Corporation by theappellants and accordingly, the business activity of Sahara Corporation in relation to

housing and real estate projects was sought to be promoted and publicized by printing logoof Sahara Corporation on the air tickets, boarding passes, baggage tags and publicity

materials and advertisement in newspaper holding, etc. in consideration of the payment

assured and paid by Sahara Corporation to the service provider at the rate fixed per

passenger under the contract. It has also been held that Sahara Corporation was engagednot only in the sale of immovable properties and construction of residential and commercial

complexes but also in renting immovable properties and maintenance of properties and

those activities clearly fall under the category of Business Auxiliary Services. It has been

further held that the publicity agreed upon and provided by the appellants and theirpredecessors of Sahara Airlines Ltd. resulted into brand building of Sahara Corporation

which promoted marketability of the services provided by Sahara Corporation by creating

awareness by building brand value of the group. The contention about the absence of anyservice being provided by Sahara Corporation which could justify the charge against the

appellants of having provided Business Auxiliary Services to Sahara Corporation has beenrejected as also the plea of bar of limitation. It has been held that the appellants failed to

produce any evidence to show as to how they had bona fide belief that the services

provided by them to promote the business and area operation to Sahara Corporation wasnot taxable under the category of Business Auxiliary Services. The said findings have been

arrived at by the learned Commissioner while answering the issues as to whether theappellants had provided taxable service under the category of Business Auxiliary Services,

whether the extended period of limitation was invokable , whether the gross amountcharged was to be considered as inclusive of service tax and whether the payment of 

interest was warranted.

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5. The impugned order is sought to be challenged on several grounds. It is assailed on the

ground that the findings arrived at by the learned Commissioner in the impugned order are

beyond the scope of the show cause notice. The appellants merely displayed logo of thegroup of companies and the appellants were part of the said group and were not rendering

any service to Sahara Corporation and in any case, the activities for which the Agreement inquestion was executed did not relate to any service as such rendered by Sahara Corporation

to its customers and hence the appellants could not have been charged of having renderedservice in the nature of business auxiliary services within the meaning of the said

expression under the said Act. Considering activity of the appellants in terms of theAgreement in question, the same being exclusively relating to display of logo, it can not be

said to have been covered by the definition of the business auxiliary service. The entries

pertaining to the services of brand promotion and sale of space have been introduced in thesaid Act subsequent to the relevant period, and hence the appellants could not be held to

have rendered such service during the relevant period nor the services covered under theentries brought into force subsequent to expiry of the relevant period can be sought to be

enforced for the period prior to the date of enforcement of such entries. The activity of theconstruction and sale of immovable property does not amount to "service" within the

meaning of the said expression under the said Act. The show cause notice issued was timebarred and neither there was any ground to justify invocation of extended period of 

limitation nor any such ground was disclosed in the show cause notice. The chargeability of a particular activity should be specifically spelt out in the show cause notice and onus to

establish the same squarely rests upon the Department. Neither the show cause noticesatisfied the said requirements nor the Department discharged the burden relating to the

said issue. The authority which had issued show cause notice lacked territorial jurisdiction to

deal with the matters arising beyond the territory of Delhi and therefore, the show cause

notice was without jurisdiction. Lastly, that the materials on record do not justify demand of interest and imposition of penalty.

6. The learned Advocate for the appellants while assailing the impugned order submittedthat a show cause notice being the foundation for the proceedings against an assessee, the

adjudication and the order passed on such adjudication cannot travel beyond the allegations

and the charge disclosed in the show cause notice. According to the learned Advocate, thefoundation laid in the show cause notice in question was that the appellants had entered

into an agreement dated 30.3.95 with Sahara Corporation to provide extensive publicity tothe activity of Sahara Corporation to promote its business and area operation, in spite of the

fact that, neither the agreement specified nor there is any evidence gathered on record toestablish that the appellants had been providing any service for promoting or marketing in

respect of any of the services provided by Sahara Corporation. The evidence, which has

been relied upon to establish the actual activity carried on by the appellants is in the natureof display of logo on the tickets, boarding passes, baggage tags etc. and on the Aircraft, andcopy of golf ball given as free gift using the said logo and copies of writing pads, newspaper

advertisement using the said logo. According to the learned Senior Advocate bare reading of the impugned order along with show cause notice would disclose that the Commissioner

clearly travelled beyond the scope of the said notice. The findings that the

construction/development of immovable properties would constitute service and the saidview gets support from Appendix X of Hand Book of Procedure of Foreign Trade, that thereal estate services of construction/development of residential and commercial projectswould qualify as the services pertaining to the immovable properties and the same was

evident from their balance sheet and that Sahara Corporation had obtained registration forvarious services and further that for the purpose of classifying of service under the businessauxiliary service, it is not necessary that the services rendered should be taxable services

are not at all borne out from the show cause notice nor even spelt out therefrom. The only

charge which was made against the appellants under the show cause notice was merereproduction of the language of the agreement dated 30.3.1995. The findings relating to the

activities of the parties arrived at by the Commissioner in the impugned order are neither

on the basis of facts stated and the allegations made in the show cause notice nor there is

any evidence in support of the same. This, according to the learned Advocate clearly justifies setting aside of the impugned order. Reliance is sought to be placed in the decision

in the matter of C.C., Mumbai v. Toyo Engineering India Ltd. reported in ( 2006-TIOL-111-SC-

CUS  ) = 2006 (201) ELT 513 (SC); C.C.E ., Nagpur vs. Ballarpur Industries Ltd. reported in( 2007-TIOL-153-SC-CX  ) = 2007 (215) ELT 489 (SC); Commissioner of Income Tax, Andhra

Pradesh vs. Motors & General Stores (P) Ltd. reported in 1967 (66) ITR 692; HPL Chemicals

vs. C.C.E . reported in ( 2006-TIOL-37-SC-CX  ) = 2006 (197) ELT 324 (SC), Metal Forgings vs.Union of India reported in 2002 (146) ELT 244 (SC), Amrit Foods Metal Forging vs.

Commissioner of Central Excise, U.P . reported in ( 2005-TIOL-164-SC-CX  ) 2005 (190) ELT 433(SC).

7. On the other hand, the DR while taking us through the show cause notice dated

30.10.2008 issued to the appellants submitted that the contention that the show causenotice merely reproduced the agreement in support of charge of failure to pay the service

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tax in respect of business auxiliary services rendered by the appellants to Sahara

Corporation is totally incorrect. He further submitted that taking into consideration each and

every allegation in the show cause notice and having analyzed the same with reference tothe materials placed on record by the Department as also taking note of the defence raised

by the appellants in their reply to the show cause notice and on the basis of all suchanalysis the Commissioner has arrived at the correct findings. There is no scope to contend

that the adjudicating authority has travelled beyond the scope of show cause notice.Undoubtedly, the agreement is the basis for the activities carried out by the appellants as

the service provider to Sahara Corporation who was the service recipient. He furthersubmitted that proper reading of the entire agreement would make it absolutely clear that

the same was for promoting the business activity of the Sahara Corporation and that was

clearly reflected from the show cause notice. It is settled law that the intention of the partyto a contract has to be gathered from the language used in the agreement and in the

matter in hand, the agreement clearly disclosed the service for promoting of the businessactivities of Sahara Corporation. The records placed before the authorities clearly

established that, besides the sale of immovable properties, Sahara Corporation wasproviding a number of services and the same is evident from the balance sheet of the said

company. Besides, the said company is also registered with the Department for the purposeof service tax and as per the registration certificate issued in Delhi and Pune, the company

can provide a number of services. He further submitted that the language of the agreementclearly reveals that Sahara Corporation wanted the appellants to give extensive publicity to

their activities in order to promote their business and area of operation. Clause (6) of theagreement provides for obligation of the appellants and popularize the schemes of thebusiness of Sahara Corporation and for that purpose to increase exposer to the general

public. The show cause notice clearly refers to various documents and statements. Taking

us through those documents and statements, particularly the relevant portions thereof, theDR submitted that the same clearly reveal all the necessary materials which justify the

findings arrived at by the adjudicating authority and there is no scope to contend that any

part of the order being beyond the scope of the show cause notice. He however, submittedthat there can be hardly any quarrel about the proposition that the order cannot travel

beyond the scope of show cause notice. However, in the facts and circumstances of the case

in hand, there is no room to accuse the adjudicating authority of having travelled beyondthe scope of the show cause notice.

8. While elaborating the grounds of challenge, the learned Senior Advocate for the

appellants submitted that the only activity which is being carried out by the appellants interms of the agreement dated 30.3.95 is that the appellants had been printing the logo on

different materials as specified in the agreement. The appellants have not carried out nor

was required to carry out any other activity. The Clause (3) and (4) of the agreement werenever given effect to and there is no dispute in that regard. He further submitted that not a

single document on record suggests that the appellants had promoted or marketed any

service as such of the Sahara Corporation. The appellants had not carried out any activity of advertising of the projects of the Sahara Corporation and the Department could not produce

any evidence in support of wild allegations in that regard. Besides, Sahara was also the

name of predecessors of the appellants. Apart from printing logo on the materials referredto above, the appellants did nothing. The appellants have not carried out any activity by

which any services allegedly provided by the Sahara Corporation could be said to have beenpromoted amongst the customers of the appellants or to the members of the public. There

is no evidence on record to suggest that mere use of word Sahara amounted to promotionor marketing of the services to Sahara Corporation. He further submitted that the scope of entry Business Auxiliary Services as is found under Section 65 (105) (19) of the said Act

relates to the services which has to be understood taking into consideration the clause (ii) of 

the said definition. It is apparent therefrom as to what types of promotion and marketingactivities are to be classified as the business auxiliary services. It is specifically confined tothe services provided by the client. In other words, unless there is service provided by the

client to others and such service is promoted or marketed by the service provider, the

activity of the service provider cannot be classified under the category of Business AuxiliaryServices under the said Act. He further submitted that activities of construction and sale of 

immovable property do not amount to services under the said category under the said Act.

Infrastructure and the real estate projects carried out by the Sahara Corporation do notqualify as the services at all. Drawing our attention to the letter dated 10.9.2004 of the

Ministry of Finance, it is sought to be contended that the same clarified that the builder

constructing for himself does not render any service as such. The said position wasreiterated in the Circular dated 1.8.2006 wherein it was clarified that if no other person is

engaged in construction work and the builder/promoter or developer undertook construction

work without engaging services of any other person, then in such cases in the absence of 

relationship of service provider and service recipient, the question of providing any service,including taxable services, to any person by any other person, does not arise. The entriesrelating to construction service apply to the builders engaged in the construction activities

for others and not for themselves who merely sell immovable properties to the customers

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by engaging themselves in the development and/ or construction activity. Reliance is sought

to be placed in the decision in the matter of Magus Construction Pvt. Ltd. Vs. UOI reported

in ( 2008-TIOL-321-HC-GUW-ST  ) = 2008 (11) STR 225 . He further submitted that to determinewhether the Sahara Corporation was rendering any service, the nature of transaction

carried out by the said company needs to be examined, if the transactions relate to thepurchase and sale of immovable properties and not to service or goods which went into

construction/erection of the immovable property, even if the some consideration is receivedprior to completion of the development of or construction in the immovable property which

was the purely matter of sale, then such transaction would not transform into a transactionof rendering services. Referring to Section 65(19)(zzzz), the learned Advocate submitted

that the explanation given to the said clause clearly shows that if the consideration was

received during the period prior to insertion of such entry in the statute book, then suchactivity cannot be classified under such services. However, amendment by way of 

introduction of explanation has created deeming fiction for the first time and it is a newcharge and obviously, therefore, prospective in nature. It is settled law that the amendment

creating new charge cannot be enforced retrospectively. As the explanation has beeninserted with effect from 1.7.2010 which is much after the period in question, the sale of 

immovable property by Sahara Corporation could not be deemed to be service during therelevant period. He further submitted that the ratio of the decision of the Apex Court in the

matter of K. Raheja Development Corporation vs. State of Karnataka reported in ( 2005-TIOL-

77-SC-CT  ) = 2006 (3) STR 337 wherein it was held that the payment of construction made in

advance amounted to work contract has been doubted and referred to Larger Bench by theHon'ble Supreme Court in Larsen & Toubro Ltd. Vs. State of Karnataka reported in ( 2008-

TIOL-186-SC-CT  ) 2008 (12) STR 257. Merely because Sahara Corporation is registered for

different types of services for the purpose of service tax, that would not suffice to conclude

that even sale of immovable property would amount to a service. Besides, mere display of logo cannot be regarded as rendering any service of promotion or marketing of any serviceprovided by their client. There has essentially to be a service provided by the client and it is

only thereupon question of promotion and marketing of such service could arise.

9. On the other hand, while countering the said argument, the DR submitted that plain

reading of the agreement and the resolution of the company would disclose that the activitywhich was carried out by the Sahara Corporation was nothing but service and the same was

specifically admitted by the appellants as well as Sahara Corporation. Taking us through theagreement in question, the DR submitted that it specifically speaks of what is expected from

the appellants for the purpose of exclusive publicity of the activity of the SaharaCorporation. It clearly speaks of need to give extensive publicity to the activities of Sahara

Corporation in order to promote their business and area of operation. The resolution by the

Sahara Corporation clearly reveals that they had decided to utilize the services of theappellants for promoting their business and in consideration thereof, the appellants were toreceive certain amount per passenger. Referring to the debit note issued by the appellants

and their predecessors to the Sahara Corporation, it was contended that the same clearlydisclose payments towards publicizing the activities of the said company. Correspondence

between the parties also disclose that the activities carried out by both the companies were

clearly understood by both of them as the services, while the service provider was providingservices of promotion of publicizing of business activities of service recipient whereas thelatter was rendering services in the nature of construction and development activity. Hefurther submitted that merely because the end product is transferred by way of sale that

will not wipe out the effect of the services rendered by the company in relation to thedevelopment of and construction in the property which is ultimately sold. The subject

matter of the sale by the company had always been developed or constructed properties

and being so, it comprised of various services rendered to make the premises or the

property complete and ready for sale. Being so, it cannot be said that the activity carriedout by the Sahara Corporation did not involve service element. He further submitted thatintroduction of new taxable entry cannot result in affecting the liability of the appellants in

relation to the services rendered as business auxiliary services. The activity may be

classifiable under two different entries, one being general and other specific. Merely becausethe specific entry was introduced subsequent to the general entry, it cannot be contended

that till such time of introduction of specific entry in the tariff book, such an activity cannot

be covered by the general entry. If the interpretation sought to be given by the appellants isaccepted, it would defeat the very purpose of the provisions of law. Besides the fact that

Sahara Corporation had been rendering service was clearly admitted in the various

statements of the officers of appellants and of Sahara Corporation and none of thosestatements were ever retracted. The courts duty is to make the tariff provisions workable.

The tax statutes are to be understood by referring to the plain language used therein and in

such cases, the question of interpretation does not arise. He further submitted that no

evidence was laid before the adjudicating authority to prove that use of logo was not helpfulto market and for promotion of real estate business of Sahara Corporation. The sole object

as envisaged by the agreement dated 30.3.95 was that of promotion of the services

rendered by the client of the appellants. It is pertinent to note that the amount paid in

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consideration thereof varied according to the length of the flight and the long distant flight

got higher remuneration as compared to the short distant flight and therefore, the exposer

time to the marketing message was the key. The mere use of logo served no useful purposeis inconceivable and no monetary consideration would have been paid without any purpose

or motive. Close to Rs.1,045 crores were not paid to the appellants as charity butessentially for promoting and marketing the services of Sahara Corporation.

10. Further, referring to subsequent entry in relation to the activity of brand promotion/sale

of space introduced by way of amendment to the said activity, it is sought to be contendedon behalf of the appellants that the activity of the appellants could at the most be covered

under entry "brand promotion" under entry No.(zzzzq) of Section 65(105) and "sale of 

space" under the entry No.(zzzm) of Section 65(105) of the said Act. However, the said

entries were introduced subsequent to the expiry to the period in question, apart from thefact that there is no charge in relation to either of the said entries. It is further submitted

that it is settled law that if the activity rendered by the assessee covers the entry

subsequently introduced and there is no amendment to the prior entry, the activity cannotbe covered under the prior entry. Reliance is sought to be placed in the decisions in the

matter of Indian National Shipowners Association vs. UOI reported in ( 2009-TIOL-150-HC-MUM-

ST  ) = 2009 (14) STR 289; Board of Control for Cricket Control in India vs. Commissioner

reported in ( 2007-TIOL-684-CESTAT-MUM  ) = 2007 (7) STR 384; Spandrel vs. C.C.E. reported in ( 2010-TIOL-830-CESTAT-BANG  ) = 2010 (20) STR 129; IBM India Pvt. Ltd. Vs. Commissioner

reported in ( 2010-TIOL-167-CESTAT-BANG  ) = 2010 (17) STR 317 upheld by the Supreme Courtin Commissioner vs. IBM India Pvt. Ltd. reported in 2010 (18) STR 137; State of Tamil Nadu

vs. M.K . Kandaswami reported in (1975) 4 SCC 745.

11. On the other hand, the DR has submitted that the contention in this regard deserves noconsideration. The entries referred to are stated to have been introduced after the expiry of 

the relevant period, however, that would not be a justification to avoid the liability of the

appellants in relation to the services rendered as the business auxiliary services during therelevant period.

12. Further challenge to the impugned order relates to the bar of limitation. It is the case of the appellants that they had acted bona fide. There were sufficient grounds to believe that

mere printing of logo would not be covered by business auxiliary service and that Sahara

Corporation was not rendering any service as such by selling immovable property. Entryrelating to the business auxiliary service did not mention the brand or logo promotion. There

was neither any judgment on the said issue nor a Circular. There was no reason or basis ormaterial available to form any view about coverage of mere display of logo by the entry

relating to the business auxiliary services. There was neither suppression nor misstatementof any fact by the appellants. Incorrect mention of the date of opinion by Shri S. S. Gupta is

wholly irrelevant in the matter, besides of being typographical mistake. Reliance is placed in

the decision in the matter of Tamil Nadu Housing Board vs. Collector reported in ( 2002-TIOL-

288-SC-CX  ) = 1994 (74) ELT 9 (SC) ; Lubri-Chem Industries Ltd. Vs. Collector reported in

( 2002-TIOL-430-SC-CX  ) = 1994 (73) ELT 257 (SC); Padmini Products vs. C.C.E . reported in( 2002-TIOL-289-SC-CX  ) = 1989 (43) ELT 195; Gufic Pharma Pvt. Ltd. Vs C.C.E ., Vadodara

reported in 1996 (85) ELT 67 maintained by the Supreme Court reported in 1997 (93) ELT187; Cosmic Dye Chemical vs. C.C.E ., Bombay reported in ( 2002-TIOL-236-SC-CX  ) = 1995

(75) ELT 721. It is therefore, sought to be contended that there was no justification toinvoke the longer period of limitation.

13. On the other hand, the DR has submitted that the appellants have not placed on record

any fact which could justify to claim of bona fide belief. All the documentary evidence andthe statement recorded clearly reveal that the appellants were fully aware that they were

rendering services to Sahara Corporation for promoting and developing services rendered

by the said company. The appellants were armed with necessary logistic and infrastructureand had sufficient access to the knowledge of law relating to service tax. They were duly

registered for the purpose of service tax, besides they had also obtained opinion fromChartered Accountant. It is another thing that in the process of obtaining opinion they had

manipulated the date of opinion. There is a clear admission by the Chartered Accountant

himself regarding such manipulation. In the absence of any material revealing the claim tobe really bona fide belief, it was a clear case of suppression of relevant facts which justified

invocation of extended period of limitation.

14. The impugned order is also sought to be assailed on the ground of failure on the part of 

the Department to spell out the chargeability of particular activity with necessary clarity in

the show cause notice. In this regard, while placing reliance in the decision in the matter of HPL Chemicals vs. C.C.E . reported in ( 2006-TIOL-37-SC-CX  ) = 2006 (197) ELT 324 (SC); Metal

Forging. Vs UOI reported in 2002 (146) ELT 241; Amrit Food vs. C.C.E . UP reported in

( 2005-TIOL-164-SC-CX  ) = 2005 (190) ELT 433, learned Senior Advocate for the appellantssubmitted that the issue involved in the case is of classification of services which is related

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to an issue of chargeability of service tax. Where the Department alleges that the service is

taxable under a particular entry, the burden lies upon the Department to establish the

same. In the present case, the Department failed to discharge the burden as no evidencewas placed on record to establish that the appellants had promoted or marketed any

services provided by the Sahara Corporation.

15. On the other hand, the DR taking us through the impugned order and various lettersand statements and documents submitted that the contention in this regard is totally devoid

of substance. The attention was also drawn to the reply to the show cause notice whilecontending that certain facts having not been disputed and rather specifically admitted ,

there was no occasion for the Department to produce any evidence in that regard. Wherever

point was required to be established by the Department, it has produced the relevantevidence.

16. It is contended on behalf of the appellants that the show cause notice was without jurisdiction inasmuch as during the period in dispute the appellants were not registered inDelhi and did not have centralized registration and therefore, the Delhi Commissionerate

could not have exercised the jurisdiction in respect of alleged obligation to pay the service

tax in relation to the services stated to have been rendered beyond the territorial jurisdiction of the Delhi Commissionerate . On the other hand, the DR submitted that the

appellants have obtained service tax registration at New Delhi and they are having

registered office at New Delhi and therefore, there is no substance in the ground sought tobe raised in the matter.

17. Lastly, the appellants seek to dispute the liability of interest and penalty. According tothe appellants they were under bona fide belief that mere display of logo which was also

similar to the appellants predecessors name would not amount to rendering any services

and there existed a reasonable cause for the appellants not to pay service tax on suchactivity and hence no interest or penalty is warranted. On the other hand, the DR submitted

that once it is established that the appellants failed to pay tax in time, the liability of interest is bound to follow and for the same reason, penalty also.

18. In support of his submissions the DR sought to rely upon the decisions in the matter of 

UOI vs. Martin Lottery Agencies Ltd. reported in ( 2009-TIOL-60-SC-ST  ) = (2009) (14) STR 593;Tata Consultancy Services vs. State of Andhra Pradesh reported in ( 2004- TIOL -87-SC-CT- LB)

= 2004 (178) ELT 22; Hotel & Restaurant Association vs. Star India Pvt. Ltd. reported in

( 2006-TIOL-195-SC-MISC 

 ) = 2007 (5) STR 161 (SC); Tata Iron and Steel Co. Ltd. Vs. C.C.reported in 1993 (66) ELT 622; Commissioner of Central Excise, Madras vs. Systems and

Components P. Ltd. reported in 2004 (165) ELT 136 (SC); Slotco Steel Products P. Ltd. vs.

C.C.E ., Delhi reported in 2010 (253) ELT 542; UOI vs. Rajasthan Spinning and Weaving

Mills reported in ( 2009-TIOL-63-SC-CX  ) = 2009 (238) ELT 3 (SC); Jaishree Engineering Co. (P)Ltd. vs. C.C.E ., reported in 1989 (40) ELT 214 (SC); Tamil Nadu Housing Board vs. C.C.E .,

Madras reported in ( 2002-TIOL-288-SC-CX  ) = 1994 (74) ELT 9 (SC); Assistant Commissioner of 

C.Ex . vs. Krishna Poduval reported in ( 2005-TIOL-77-SC-CT  ) = 2006 (1) STR 185 (Ker.); DeviDass Garg vs. C.C.E ., Delhi I reported in ( 2010-TIOL-1502-CESTAT-DEL ) = 2010 (257) ELT 289;

Mechanical Constructors vs. C.C.E ., Bhopal reported in 2009 (248) ELT 532; Positive

Packaging Industries Ltd. vs. C.C.E ., New Panvel reported in ( 2010-TIOL-1369-CESTAT-MUM  ) =

2010 (249) ELT 57; Kerala State Electricity Board vs. C.C.E ., Thiruvananthapuram reportedin ( 2007-TIOL-226-SC-ST  ) = 2008 (9) STR 3 (SC); Association of Leasing and Financing

Company vs. UOI reported in - 2010-TIOL-87-SC-LB; State of Madras vs. Gannon Dunkerleyand Co. (Madras) Ltd. reported in 2002-TIOL-493-SC-CT-LB; Bharat Sanchar Nigam Ltd. vs. UOI

reported in ( 2006-TIOL-15-SC-CT-LB ) = 2006 (2) STR 161; Indo China Steam Navigation Co.Ltd. Vs. Jasit Singh, Additional Collector of Customs of Calcutta and others reported in 1993

(13) ELT 1392.

19. Considering the facts of the case and the contentions sought to be canvassed on behalf of the parties, the following points arise for consideration:-

(i) What was the charge in the show cause notice and whether the impugned order travels

beyond the scope of show cause notice? Simultaneously, it would also be necessary toconsider whether the activity for which the appellants were charged was spelt out in the

show cause notice and the such charge against the appellants has been established bysufficient materials on record?

(ii) Whether the services rendered by the appellants to M/s. Sahara Corporation would fall

under the category of "Business Auxiliary Services" within the meaning of the saidexpression under the said Act? As a corollary to this issue, it would be necessary to consider

whether the display of logo by itself would amount to rendering services within the meaning

of the expression "Business Auxiliary Services" under the said Act?

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(iii) Whether the entries relating to brand promotion and sale of space having been

introduced in the said Act subsequent to the relevant period, the appellant could be held to

have rendered such services prior to the introduction of such entries in the said Act orwhether such entries could be held to be forming part of the Business Auxiliary Services for

the period prior to the introduction of such specific entries in the said Act?

(iv) Whether the authority who issued the show cause notice lacked territorial jurisdiction todeal with the matter?

(v) Whether the show cause notice was barred by limitation and there was no justification

for invocation of extended period of limitation?

(vi) Whether the demand for interest is justified?

(vii) Whether the facts of the case warranted imposition of penalty?

20. At the outset, it is sought to be contended that the Commissioner traveled beyond the

scope of the show cause notice. While dealing with the scope of the show cause notice, it

would be also necessary to ascertain the scope of the charge in the show cause notice aswell as that of the agreement dated 30.3.1995 which is the basis for the charge of service

tax against the appellants.

21. The show cause notice referring to the agreement dated 30.3.1995 specifically recorded

that the perusal of the said agreement disclosed that the same was entered into to promote

the business and to extend area of operation of Sahara Corporation who was to pay to theappellants the agreed amount per passenger ticket for service rendered by the appellants.

To arrive at the said conclusion drawn in the show cause notice, the department specifically

transcribed in the notice two paragraphs from the agreement, one from the preamble of theagreement and another being clause No. 5 of the agreement. The transcribed portion of the

said agreement reads thus:-

"Sahara India Airlines,

Sahara India Bhawan ,1, Kapurthala Complex,

Lucknow .

We refer to the discussion of the undersigned had with your Director Shri Subroto Roy Sahara on the above matter in several meetings. What we want your Airlines to do is to give

extensive publicity to our activities in order to promote our business and area of operation.We confirm that the following arrangements have been arrived at with you by us.

5. Since publicity is mainly directly linked with the tickets issued by you and/or passengers

to be carried by in your aircraft, we shall pay you Rs . 1075/- per passenger on the longsector and Rs . 400/- per passenger on short sector carried by you." 

22. Having quoted as above, the show cause notice further stated that the amount paid by

Sahara Corporation per passenger was changed from time to time by consent of the parties.It was also recorded that in the course of investigation statement of Shri R.S . Dubey was

recorded who had confirmed such changes in the amount paid per passenger and hadstated that Sahara Corporation was a housing and infrastructure company and was

developing/ constructing residential and commercial complexes/ townships under the brandname "SAHARA" and the Sahara Corporation was flagship company of Sahara group. Shri

O.P. Srivastava, Director of Sahara airlines Ltd. stated in his statement that Sahara

Corporation was engaged in housing real estate and infrastructure business, that in the year1993 Sahara Corporation had launched various projects of housing and real estate, and

therefore, passengers of the appellants were targeted for sale of those projects and that itwas thought to provide publicity of various projects through appellants and to increase the

area of operation of Sahara Corporation and that the appellants were advertising the

projects of Sahara Corporation, and therefore, it was decided to reimburse them in the formof certain amount per passenger ticket for the services provided by them. It was further

observed in the show cause notice that Sahara Corporation was developing various realestate projects and for promotion of those projects they utilized the services of the

appellants and paid them for the services rendered. In terms of the said agreement, theappellants displayed the logo of Sahara Corporation on various materials as agreed and

received remuneration for the same from Sahara Corporation which was collected

depending upon the number of persons traveled in the appellants airlines during therelevant period and depending upon the distance they had traveled, and thus the appellants

rendered Business Auxiliary Services within the meaning of the said expression under thesaid Act and therefore are liable to pay the service tax.

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23. The contention that the Commissioner has traveled beyond the scope of show cause

notice is sought to be made good by referring to the findings in the order to the effect that

the construction and development of immovable property would constitute service and thatthe said view gets support from Appendix X of the Handbook of Procedure for Foreign Trade

that therefore the real estate services of construction/ development of residential andcommercial projects would qualify as services as understood in commercial parlance,

secondly to the finding that Sahara Corporation had been providing a number of otherservice besides sale of immovable property and the same is evident from the balance sheet

and that Sahara Corporation has obtained registration for various services.

24. On the other hand, referring to the contents of the show cause notice and in particular

the recording therein to the effect that the Sahara Corporation was developing various real

estate projects and for promotion of those projects, they had utilized the services of theappellants and their predecessor and paid them for the services rendered by them in that

regard and reference to statements of various persons recorded in the course of 

investigation as well as reference to the various documents recovered during the course of investigation and further taking us through the statements of different persons and

documents it was sought to be contended by the DR that the contention about the authority

having traveled beyond the scope of the show cause notice is absolutely incorrect. He

submitted that the fact that the Sahara Corporation was engaged in the business of development and construction activities and sale thereof and further the same was sought

to be promoted with the help of the appellants was clearly disclosed in the show causenotice and was made good by the materials placed on record, such material being collected

in the course of the investigation.

25. In Metal Forging case, the Apex Court had ruled that in the absence of a show causenotice, it is not open to the revenue to make a demand on the appellants even assuming

that the contention of the revenue in regard to the classification is held by the authority tobe correct.

26. In Amrit Foods case, the Apex Court had quashed the proceedings in the absence of the

ground being disclosed in the show cause notice as the duty liability was sought to befastened on the basis of such non disclosed ground.

27. In Ballarpur Industries Limited case, the Apex Court held that it is well settled law thatthe show cause notice is the foundation in the matter of levy and recovery of duty, penalty

and interest.

28. Similarly, in Toyo Engineering India Ltd ., the Apex Court had held that the departmentcannot travel beyond the show cause notice.

29. Undoubtedly, the statements of various persons particularly of Shri R.S . Dubey , ShriO.P . Srivastava and Vandana Bhargava read in proper prospective would reveal that the

Sahara Corporation was engaged in the business of development of immovable propertiesand in construction of projects. It is also clear from the records that the promotion of such

activities was thought to be made through the appellants and their predecessor and for thatpurpose the agreement dated 30.03.1995 was entered into. In terms of the agreement, thelogo of Sahara Corporation was displayed on different items as agreed upon in consideration

of receipt of amount paid by Sahara Corporation calculated on the basis of number of passengers and the distance traveled by them. In this regard, the show cause notice andthe materials on record are clear and the findings on those aspects cannot be said to be

beyond the scope of the show cause notice.

30. However, considering the allegation in the show cause notice, and the scope of charge

thereunder, certainly the findings to the effect that the construction and development of 

immovable properties would constitute service and therefore the real estate activities of construction and development of residential and commercial projects would qualify as

services as understood in common parlance and the same is established from Handbook of Procedure for Foreign Trade and that Sahara Corporation was providing number of other

services, apart from sale of immovable property, evidently disclose to be going beyond the

scope of the show cause notice. The fact that the Commissioner has arrived at the said

findings is apparent from the impugned order. However, the show cause notice did notallege that real estate activities in the nature of construction and development of residential

and commercial project were amounting to services and that it was so understood in

common parlance and that the same was establish from the Handbook of Procedure for

Foreign Trade. Indeed none of these facts could be said to have been stated or disclosed inany manner in the show cause notice. If the construction or development activity amounts

to render "service" which would qualify the same to be one in respect of which some other

person or entity can conduct the activity of the nature of Business Auxiliary Service for thepurpose of attracting the provision of Section 65(19)(ii) of the said Act, was intended to be

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the charge against the appellants to bring them in the net of service tax under the said

provision of law, obviously, it was necessary for the department to lay necessary factual

foundation in that regard in the show cause notice. It is not a mere matter of conclusion tobe drawn from some other facts stated in the notice. Indeed, there was not even a whisper

about any of the above noted facts in the show cause notice. Being so, the appellants are justified in making grievance about the said findings on the ground that the same traveled

beyond the scope of the show cause notice.

31. The appellants are also justified in making grievance about the finding of theCommissioner that Sahara Corporation was engaged not only in the sale of immovable

properties and construction and development of projects but also in rendering number of 

other services. Not only the show cause notice was completely silent about the same, but

even in the course of adjudication, apart from the certificate of registration for a number of services and the Memorandum and Article of Association disclosing scope for rendering

various services by Sahara Corporation, no material has been placed on record which could

show any activity by Sahara Corporation which could reveal rendering of any of thoseservices by Sahara Corporation.

32. The show cause notice is essentially based on the agreement dated 30th March 1995.Undoubtedly, in support of charge, apart from the said agreement, various other documents

and statements of various persons are relied upon. From all the materials on record it has

been clearly established and, rather has been fairly conceded by the learned Advocate forthe appellants, that the fact that logo by name "SAHARA" was displayed by the appellants

on the materials like boarding passes, tickets, baggage tags, etc. as also on the aircraft,writing pads, newspaper advertisements is not in dispute and that the same was in terms of 

the agreement dated 30.03.1995. Apart from the same, according to the appellants, thedepartment has not produced any other material which could reveal any other activity of 

rendering of any taxable service as such by the appellants and much less the services which

could fall in the category of Business Auxiliary Services. On the other hand, the departmentcontends that besides display of logo, the agreement also reveals that brochures issued by

Sahara Corporation were also sought to be distributed to the passengers by the appellants.

On the other hand, the appellants contends that the clause regarding the brochures wasnever given effect. The department has also sought to rely upon the Memorandum and

Articles of Association as well as Balance Sheet of Sahara Corporation, registration

certificate under the Service Tax Act of Sahara Corporation in support of the charge againstthe appellants. In addition to this evidence, the department has relied upon the statements

of various persons recorded in the course of investigation as also other documents in the

form of correspondence, copies of invoices, etc. recovered in the course of investigation.Perusal of the impugned order discloses that the finding about rendering of Business

Auxiliary Services by the appellants to Sahara Corporation has been arrived at essentially

on the basis of Memorandum and Articles of Association, Balance Sheet and service taxregistration certificate of Sahara Corporation, agreement dated 30.3.2005 and undisputedfact of display of logo on the above stated materials. On the basis of these materials, it has

been held that the appellants had been promoting and marketing the services provided by

Sahara Corporation and activity of the appellants, therefore, fall in the category of BusinessAuxiliary Services.

33. Undoubtedly, therefore, there is no dispute about display of logo of Sahara Corporationby the appellants on various materials as enumerated in the contract. The question is what

is other evidence produced on record regarding the activity of the appellants which could

disclose rendering of Business Auxiliary Service to Sahara Corporation during the relevantperiod.

34. In HPL Chemicals , the Apex Court had ruled that the classification of goods is a matter

relating to chargeability and the burden of proof squarely lies upon the revenue. If thedepartment intends to classify the goods under a particular heading or sub-heading different

from that claimed by the assessee, the department has to adduce proper evidence anddischarge the burden of proof.

35. The basis for the charge against the appellants and the main piece of evidence againstthem is the agreement dated 30.03.1995 which reads thus:

"We refer to the discussions of the undersigned had with your Director, Shri Subrata Roy Sahara, on the above matter in several meetings. What we want your AirLines to do, is togive extensive publicity to our activities in order to promote our business and area of the

operations. We confirm that the following arrangements have been arrived at with you by us:

 All your Aircrafts will have exactly the same logo and in the same colour as used by us and the same will be prominently displayed outside of both sides of each and every aircraft in

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the manner that the same is clearly visible to general public at least from the distance of 200 metres .

(1) You will use our logo and its colour scheme on all your tickets, Boarding Passes,Baggage tags, publicity materials and advertisements in newspapers, hoardings, etc.

(2) Our brouchers (to be supplied by us) will have to be distributed with each ticket issued by you.

(3) You have agreed to make other arrangements required from our side to popularize our business as may be intimated by us to you after mutual consent.

(4) Since the publicity is mainly, directly linked with the tickets issued by you and / or  passengers to be carried by in your aircrafts, we shall pay you Rs . 1075/- per passenger on

long sector and Rs . 400/- per passenger on short sector carried by you.

(5) It is also further agreed that to popularize our schemes and business activities and for 

that purposes to increase exposure to the general public, you will allow on trunk routes a

minimum discount of Rs . 500/- to passenger on every trip till such time arrangements asabove remain in force.

(6) That the above arrangements shall remain in force for a period of one year with effect from 1st April, 1995, or renewed further.

(7) You will allow at all reasonable time our representatives to verify that you are complying

with the above arrangements, on board of the Aircraft as well as station offices and accounts department (s).

You shall allow our representatives complimentary tickets free of charge to enable them tomake such verification(s).

Please return a copy of this letter duly signed by you as a token of your acceptance of the

above arrangements and all terms and conditions together with a certified copy of resolutionof Board of Directors of your Company approving such arrangements, terms and conditions.

We look forward to have association with your Company for mutual benefits." 

36. Perusal of the above agreement undoubtedly discloses that an understanding wasarrived at between predecessors of the appellants and Sahara Corporation for the display of 

the logo of the latter by the former on the materials mentioned in the agreement. It was

also agreed that the former shall make arrangement for popularizing the business of the

latter as may be intimated by the latter. In brief, the agreement was for performing an

activity by the appellants for publicity and to promote the business and to extend area of operation of Sahara Corporation. The agreement also specified the manner in which such

activity was required to be carried out by the appellants. The manner of promotion was to

be by way of display of logo and distribution of brouchers apart from other arrangementswhich could be necessary to popularize the business of Sahara Corporation as would be

intimated by Sahara Corporation and was required to be performed after mutual agreementin that regard.

37. It is the contention of the appellants that the terms regarding brouchers and otherarrangements were never implemented. Though in the course of arguments the DR had

sought to dispute the claim, we have not been pointed out any evidence which could revealenforcement of both those terms. It should not be forgotten that the service tax is to be

levied in relation to the service either provided or to be provided. Mere clause in agreementwhich discloses the intention of the parties for performance of some acts and deeds cannot

be by itself lead to conclusion about enforcement of such clause unless some evidence inthat regard is produced. Neither the impugned order refers to any such material which could

reveal enforcement of those two terms nor any material on record has been pointed outwhich could establish the same. In such circumstances we are left with no alternative than

to accept the case put forth by the appellants that the said terms regarding brouchers was

never enforced. In fact, we find such claim having been made even in reply to the showcause notice. Being so it was necessary for the department to counter the same by

sufficient material. We do not find any such material on record.

38. As regards other arrangements for publicity of business of Sahara Corporation is

concerned, on the face of it, the clause in respect thereof in the agreement refers to the

requirement of intimation thereof by Sahara Corporation and the performance thereof onlyupon mutual consent. Clause (3) of the agreement is very clear to that effect. Neither there

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is any evidence on record nor it is the case of the department that any such intimation was

ever communicated by Sahara Corporation about any such arrangement for publicity of 

business or that any such mutual consent in that regard was ever given by the parties atany time after the execution of the agreement. Obviously, therefore, the contention of the

appellants about non-enforcement of clause (3) of the agreement has to be accepted.

39. On the face of it, therefore, the agreement undoubtedly speaks of decision by SaharaCorporation to give wide publicity to the activities of Sahara Corporation in order to promote

their business and expand the area of operation and that the appellants had agreed todisplay the logo of Sahara Corporation on different materials specified in the agreement.

The agreement on the face of it nowhere specifies any particular business of Sahara

Corporation which could be said to be the subject matter of publicity and/ or promotion

thereof. It is, however, the contention of the department that the same was relating to thebusiness of development and construction activity in the immovable properties and the said

contention is sought to be made good by referring to the Memorandum Articles of 

Association, Balance Sheet and statements recorded in the course of investigation and someother documents which were seized in the course of investigation.

40. The agreement also discloses payment of substantial amount for display of logo. Thelogo was required to be displayed on tickets, boarding passes, baggage tags, publicity

material, advertisements in newspapers and hoardings. In consideration thereof the

appellants were entitled for Rs.1075 /- per passenger on long distance sector and Rs . 400/-per passenger on short distance sector. It is undisputed fact that such logo was accordingly

displayed and amount was paid to the appellants. The amounts were revised upward fromtime to time.

41. As far as Memorandum and Articles of Association is concerned, it is not known as to

how the same can establish the case of the department. Such memorandum can merelydisclose the main objects which are required to be pursued by the company. It would

certainly disclose various fields in which company can have its activities. That itself,however, would not disclose that the company was engaged in all those activities nor the

same could disclose rendering of any service as such by the appellants. Besides, evenassuming that company's objectives are to render services in the nature of development

and construction of immoveable properties, it is necessary to establish that the activities

carried out by the appellants were in the nature of rendering "service" for promoting andmarketing of the service of development and construction of Sahara Corporation to others in

order to sustain the demand of service tax against the appellants for having renderedBusiness Auxiliary Services to Sahara Corporation. Mere Memorandum Article of Association

by itself cannot be of any help in this regard.

42. As far as Balance Sheet is concerned, it merely relates to rental space as well asreceipts from rooms/restaurants and contract work. It has not been established by the

department that contract work referred to in the balance sheet was in relation to any

development and construction activities of Sahara Corporation, and that the same was forothers, nor there is any evidence collected in that regard. Merely because the Balance Sheetdiscloses an entry of contract work that by itself is not sufficient to establish that it related

to any development or construction activity for others by Sahara Corporation. It was

absolutely necessary for the department to lay the foundation for such charge in the showcause notice and also to establish that the services rendered by the appellants were in

relation to such contract work which was related to the development and constructionactivity by Sahara Corporation for others. There is absolutely nothing on record even to

suggest remotely that the department had even attempted to ascertain about this aspect inany manner.

43. Another piece of evidence which is relied upon is the registration certificate. Merely onthe basis of registration certificate, one can not conclude about the liability of service tax.

Merely because a firm has enrolled under the said Act that does not mean that the firm is

necessarily carrying out all or some or even any one type of service for which registration

has been obtained. Just because there is certification of registration, there is nopresumption that the firm registered under the said Act for a particular service is necessarily

rendering such service. Whether a firm is engaged in rendering a particular type of serviceor not is not a pure question of law. Before arriving at any conclusion on that respect, the

department has to place on record factual matrix which would disclose the basic informationrevealing the activity on the part of the firm which could reveal rendering of services to

others.

44. DR has made specific reference to certain documents while contending that thosedocuments lend support to the case of the Department that the appellants had been

rendering the services of promoting and marketing of the services rendered by the SaharaCorporation. In that regard, attention was drawn to the letter dated 18.12.2007 by Shri R.S

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. Dubey to Senior Intelligence Officer, the Kanpur, letters dated 30.3.96, 30.6.98,

24.3.2000, 31.3.02, 23.3.04 and 25.3.04 by Sahara Corporation. The letters dated 23.6.08

by Shri R.S . Dubey , dated 14.7.08 by Shri O.P . Srivastava , dated 26.6.08 by Shri SarojK. Dutta , dated 13.10.08 by Shri J.P. Tiwari , dated 17.12.08 by various authorized

signatories of the appellants , dated 18.9.09 by Saroj K. Dutta , dated 26.5.08 also by ShriSaroj K. Dutta and letter the dated 3.1.08 by Shri R.S . Dubey were also relied and referred

to. Besides, the attention was also drawn to the registration certificate of the appellantsunder the said Act, the opinion dated 4.8.03 by Shri S.S. Gupta, C.A. and to the details of 

payments made by Sahara Corporation to the appellants.

45. The letter dated 18.12.07 by Shri R.S.Dubey is merely in response to the letter to

Senior Intelligence Officer, Kanpur asking certain information in the course of investigation.

The letter dated 25.3.04 by Shri J.B.Roy is merely informing about the right of SaharaCorporation to revise the charges payable under the agreement. Similar are the letters

dated 23.3.04, 31.3.02, 24.3.2000, 30.6.98 and 30.3.96 merely confirming the payment of the charges in terms of the agreement.

46. The letters dated 23.6.08 by Shri R.S . Dubey to Shri P.K . Tripathi was in relation to

the information furnished to the Department that apart from the agreement dated 30.3.95,Sahara Corporation had entered into an agreement relating to loan transaction with Sahara

Airlines Ltd. and that Shri S.S. Gupta was associated with Sahara Group since 2002onwards. The letter also referred to opinion given by Shri Gupta.

47. The letter dated 14.7.08 by Shri O.P . Srivastava was a letter forwarding the copies of agreement and the copy of the Board meeting for the resolution giving consent to the

agreement dated 30.3.95.

48. The letter dated 26.6.08 was in relation to the change of name of Sahara India HousingLtd. to Sahara India Commercial Corporation Ltd.

49. The minutes of the Meetings of the Board of Directors of the predecessors of the

appellants held on 30.1.95 were to the effect that the company had decided to accept the

proposal received from Sahara Corporation for promotion of their business by publicizing thematerial supplied by Sahara Corporation in that regard and for rendering such services andto accept the proposal regarding the payment of Rs.1075/- per ticket on long sector and

Rs.400/- per ticket for short sector. The certificate of incorporation declares the Sahara tohave been incorporated under the Companies Act, 1956. The letter dated 13.10.08 by ShriJ.P. Tiwari was merely forwarding letter in respect of debit note and service tax return. The

letter dated 17.12.07 was a forwarding letter in respect of copies of debit notes for the year2003-04 upto 2006-07.

50. The other letter dated 17.121.07 was a forwarding letter in respect of copies of debitnote. The letter dated 18.9.07 was regarding surrender of the service tax registration. The

letter dated 17.11.06 was on the subject of centralized registration. Like wise was the letterdated 30.3.02.

51. The letter dated 26.5.08 was in response to queries made by the Department with the

Director Shri Saroj K. Dutta. The same categorically states that the Director was not awareof the applicability of service tax or otherwise to any of the activity under reference carriedout by Sahara Airlines Ltd. and further, that the appellants took over the management of 

Sahara Airlines Ltd. and therefore, could not be held liable for service tax of Sahara Airlines.

52. The letter dated 3.3.08 was in response to the letter sent to him by the investigatingofficer.

53. As far as the payment documents was concerned, they merely disclose the paymentshaving been made in terms of the agreement and from time to time, there was a change in

the quantum of amount payable under the agreement.

54. If we take into consideration all the above referred documents together they

undoubtedly disclose the understanding which was arrived at between the appellants andSahara Corporation for display of latters logo on various materials and for that purpose the

appellants were to receive certain remuneration from Sahara Corporation and wasaccordingly paid by Sahara Corporation. Apart from the above documents, attention was

drawn to the statements of various persons recorded in the course of investigation.

55. Shri O.P. Srivastava had stated in his statement dated 27.5.08 that Sahara Corporation

was engaged in housing, real estate and infrastructure business. In the year 1993 theSahara Corporation had launched various projects of housing and real estate, and therefore,

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the passengers of Sahara Airlines were to be targeted for sale of those projects. It was

thought appropriate to provide publicity of various projects through Sahara Airlines to

increase the area of operation of Sahara Corporation and since the Airlines agreed toadvertise their projects, it was decided to reimburse them for such activity by them and

therefore, to pay certain amount per passenger ticket. It was further stated that the rateswere revised depending upon the occupancy of the passengers in the Airlines. As the

increased number of passenger would give more publicity and would extend the area of operation of the Sahara Corporation, therefore, the rates per passenger ticket were

accordingly revised.

56. Shri R.S.Dubey , in his statements recorded on 11.12.2008 had submitted the ledger

accounts pertain to Sahara Corporation for the period 2003-04 to 2006-07. Shri R.S . Dubey

in his statements he had stated that the display of logo was in accordance with theagreement dated 30.3.95 between the parties. The Sahara Corporation was developing

 /constructing residential and commercial complex township under the brand name Sahara.The operational revenue was the receipt from operation of business.

57. Mrs. Vandana Bhargava , Executive Director of Sahara Corporation had stated that she

had discussion with Shri Subruto Roy of Sahara on several meetings regarding publicity of activities and relating to promotion of business activities of Sahara Corporation through

Sahara Airlines. Shri J.K . Tiwari had provided details of the payment made pursuant to thesaid agreement by Sahara Corporation to the appellants.

58. Shri Saroj K. Dutta in his statement dated 15.5.08 had stated that Sahara Airlines wererequired to provide certain services to Sahara Group of Companies on payment of their

charges to Sahara Airlines. She had also stated that she had no personal knowledge about

the details nor had clear understanding about the reasons for making various entries in the

books of accounts. However, the payments must be relating to the services provided bySahara Airlines towards advertisements and promotion of business under the agreement

dated 30.3.95.

59. Perusal of the entire evidence referred to above would disclose that the appellants had

undoubtedly agreed to display logo of Sahara Corporation on different items as specified in

the agreement. Equally, it is established that the appellants were entitled to receiveremuneration for rendering such service and the same was required to be calculated at a

fixed agreed rate per passenger. The whole purpose of calculating the remuneration on the

basis of number of passengers in the airlines was that the airlines passengers were to betargeted for sale of projects by Sahara Corporation. The project comprised of residential andcommercial complexes. The parties had also agreed that there could be other arrangement

to popularize the business of Sahara Corporation on intimation in that regard by Sahara

Corporation and by way of mutual consent. Equally it is established that the appellants infurtherance of such agreement displayed the logo and to that extent were duly

compensated by payment on the basis of number of passengers travelled in the airlines of 

the appellants. To that extent, certainly, the appellants were engaged in conducting someactivity for Sahara Corporation. However, the question which calls for determination is

whether such activity amounted to taxable service and whether it falls in the category of business auxiliary service within the meaning of the said expression under the said Act.

60. The analysis of all the materials on record disclose that three factors have been clearly

established. One that Sahara Corporation was engaged in the business of development of immovable properties and project buildings and sale thereof. Secondly, the parties had

entered into an agreement for promoting the said business of Sahara Corporation by the

appellants. Thirdly, in terms of the said agreement, the appellants displayed the logo of 

Sahara Corporation on various items as agreed upon. It is, therefore, necessary to ascertainwhether the business of development of immovable properties and project building and salethereof amounts to rendering service to others and whether the display of logo amounts to

rendering taxable service under the caption "Business Auxiliary Service".

61. The Finance Act, 1994 does not define the term "Service". It merely describes the

expression "Taxable Service". As far as the matter in hand is concerned the liability of theappellants is said to be in terms of Section 65 (19) (ii) read with Section 65 (105) (zzb) of 

the said Act.

62. Section 65 (19) of the said Act defines the "Business Auxiliary Services" and under

clause (ii) thereof it provides that Business Auxiliary Service means, any service in relation

to promotion or marketing of service provided by the client. Section 65 (105) (zzb) definesthe "Taxable Service" means, any service provided or to be provided to a client by any

person in relation to Business Auxiliary Service. In fact, the expression "any person" was

substituted for the earlier expression "a commercial concern" since 18th April, 2006,consequent to the amendment to Finance Act.

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63. Perusal of the above provisions of law, therefore, would disclose that a person can be

said to have rendered Business Auxiliary Service in terms of the provisions of law in force,

on being established that he has rendered service in relation to either promotion ormarketing of some service provided by the client. The fact, that the service provider has

rendered the service of promotion or marketing of the service provided to others by theservice recipient, has to be established before such person can be said to have rendered the

taxable service which can be classified under the said clause. Unless the service recipient isshown to have been engaged in rendering some service to others and the service provider is

shown to have rendered his service for promotion or marketing of such service provided bythe service recipient to others, the question of creating liability under the said Act in terms

of Section 65(19) (ii) read with 65(105) ( zzb ) of the said Act does not arise.

64. The dispute in the case in hand essentially is whether the activities in the nature of development and construction and sale thereof to others by Sahara Corporation, for which

the appellants had agreed for promotion and marketing thereof, were the services within

the meaning of said expression under the said Act. It is the contention of the appellants thatthe activities carried out in the nature of development and construction by Sahara

Corporation were not in the form of services to others but those were activities for their own

benefit so that they could sell the developed or constructed properties and the sale of the

properties do not include element of service. On the other hand, it is the contention of thedepartment that such activities amount to render service to others and, hence, the

provisions of Section 65(19)(ii) read with Section 65(105)( zzb ) are squarely attracted.

65. As already stated above, the term "Service" has not been defined under the said Act. InBlack's Law Dictionary the term "service" has been defined to be an act of doing something

useful for a person or a company for a fee. The expression "service charges" is definedtherein to mean charge assessed for performing of service, such as charges assessed by

bank against the expenses of maintaining or servicing a customer checking account. Even

while defining the term taxable service under the said Act, the definition specifies thetaxable service to mean any service provided or to be provided to any person whereas the

business auxiliary service has been defined to mean any service in relation to the service

provided by the client. Being so, taking into consideration the common understanding of thedefinition of the term "service" as well as the definition of the term "taxable service" underthe said Act, it is evident that the service contemplated under Section 65 (19) is the one

which relates to service rendered by the service recipient. It may be taxable service or maynot be so. However, the situation invariably contemplates existence of two entities in order

to bring the case within the scope of definition of business auxiliary service. One entity

which provides service to others is called a service recipient. Another entity is one whichprovides service to the service recipient in relation to the service rendered by such service

recipient to others, and such entity is called the service provider.

66. It is the contention on behalf of the appellants that construction and developmentactivities which were carried out by Sahara Corporation did not involve rendering of service

of any nature to others. Sahara Corporation merely developed or constructed the propertiesand sold the same to others. According to the appellants the department has not produced

any evidence to show that Sahara Corporation had been collecting money from others inrelation to construction or development activities or that Sahara Corporation had been

rendering services of development and construction in consideration received from others.All throughout, it was the case of the appellants that whatever development and

construction activities which were carried out by the appellants were for their own benefit

and they were merely selling the immovable properties either developed or constructed. Thesale of immoveable properties do not involve service element and, therefore, there was no

service as such rendered by Sahara Corporation for which the appellants had renderedservice of promotion or marketing. If at all any activity of promotion and marketing was

rendered by the appellants to Sahara Corporation, it was in respect of sale activitiespertaining to immoveable properties of Sahara Corporation and that too by merely

displaying the logo of the Sahara Corporation. Therefore, the same would not fall within thecategory of "Business Auxiliary Services" within the meaning of the said expression underthe said Act. Heavy reliance is sought to be placed in that regard in the decision of Gauhati

High Court in Magus Construction case as also of the Apex Court in the matter of Larsen &Tourbro . The contention is seriously disputed on behalf of the department.

67. It was sought to be contended that in view of undisputed facts and admissions on behalf 

of the appellants, it was not necessary for the department to place on record any material insupport of their allegation about rendering the Business Auxiliary service in the form of sale

as well as renting and maintenance of immovable properties by the Sahara Corporation. The

contention is totally devoid of substance. Firstly, there is no such admission by any personon behalf of the appellants. Secondly, in case of classification burden was squarely upon the

department. Besides, there is nothing filed on record to establish that the activity of sale of immovable properties amounted to the service as such.

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68. The statement to the effect that Sahara Corporation was engaged in the business of 

project building and sale thereof, that itself would not amount to rendering service. There isbasic difference between sale and "service".

69. In Magus Construction case Gauhati High Court was dealing with the question as to

whether the assessee had been working as service provider for those persons with whom

the assessee had entered into agreement and had constructed flats for the purpose of saleto those with whom such agreements were entered into.

70. In Magus Construction case, the agreement between the parties thereto clearly

disclosed that the same was in the nature of purchase and sale of premises and not forcarrying out constructional activity on behalf of the prospective buyers, and the assessee

was selling flats/premises and the entire transaction was nothing but the sale and purchase

of immoveable properties. It was observed by the High Court that even the registering

authorities treated the documents as the agreement of sale/purchase of flats/premisesinasmuch as the consideration was for sale and not for carrying constructional activities and

stamp duty was levied on sale consideration.

71. The Gauhati High Court taking into consideration various provisions of the said Actobserved that the term "service" has not been defined in the said Act by way of any

explanation or otherwise or by the Rules framed thereunder though the said term is definedunder various other statutes. Reference was made in that regard to the Income Tax Act,

1961, Monopolies and Restricted Trade Practices Act, 1969, Consumer Protection Act, 1986and Foreign Exchange Amendment Act, 1999 and it was held thus:

"29. In the light of the various statutory definitions of "service", one can safely define

"service" as an act of helpful activity, an act of doing something useful, rendering assistanceor help. Service does not involve supply of goods; "service" rather connotes transformation

of use/user of goods as a result of voluntary intervention of "service" provider and is an

intangible commodity in the form of human effort. To have "service", there must be a"service provider" rendering services to some other person(s), who shall be recipient of such

"service".

30. Under the Finance Act, 1994, "service tax" is levied on "taxable service" only and not on"service provider". A service provider is only a means for deposit of the service tax to the

credit of the Central Government. Although the term "service receiver" has not been defined in the Finance Act, 1994, the service receiver is a person, who receives or avails the

services provided by a "service provider".

31. From the provisions of the law extracted hereinabove, it becomes abundantly clear that the burden of registration and payment of "service tax" is on the person, who provides

"taxable service" to any person. According to the petitioner-company, it does not provideany "taxable service" to any person so as to warrant its registration under the Finance Act,

1994, and/or to pay any "service tax" thereunder. Any part of constructional activity for construction of building, which is carried out by the petitioner-company, is not a "service

rendered" to any one, but an activity, which is carried out by the petitioner-company, for itsown self. Since the very concept of rendering of "service" implies two entities, one, who

renders the "service", and the other, who is recipient thereof, it becomes transparent that 

an activity carried on by a person for himself or for his own benefit, cannot be termed as"service" rendered.

32. Prior to the amendment of the Finance Act, 1994, in the year 2005, the Central Board of Excise and Customs, vide Circular No. 80/10/2004, dated September 17, 2004, clarified that estate builders, who construct buildings/premises for themselves (for their own use, renting

it out or for sale thereof subsequently) are not covered within ambit of the construction

services. Clause 13.1 of this circular states as under :

"13.1 Services provided by a commercial concern in relation to construction, repairs,alteration or restoration of such building, civil structures or parts thereof which are used,

occupied or engaged for the purposes of commerce and industry are covered under this new 

levy. In this case the service is essentially provided to a person who gets suchconstructions, etc., done, by a building or civil contractor. Estate builders who construct building/civil structures for themselves (for their own use, renting it out or for selling it 

subsequently) are not taxable service providers. However, if such real estate owners hirecontractor/contractors, the payment made to such contractor would be subjected to 'servicetax' under this head. The tax is limited only in case the service is provided by a commercial 

concern. Thus, service provided by a labourer engaged directly by the property owner, or a

contractor who does not have a business establishment would not be subject to 'service

tax'." 

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33. The clarification offered under the abovementioned circular, shall be applicable even

after amendment of the Finance Act, 2005, whereby "construction service" includes

construction of "residential complex". Thus, construction of "residential complex" has alsobeen brought within the purview of service tax and what kind of activities for "residential 

complex" would attract "service tax" would have to be understood in the light of theclarification, which the circular aforementioned offers." 

(Emphasis supplied)

72. The Gauhati High Court thereafter also referred to a Circular dated 1.8.2006 issued by

the Board and held thus:

"37. The Central Board of Direct Taxes (sic) (C.B.E. & C.) has also, vide Circular No.

332/35/2006- TRU, dated August 1, 2006, clarified that if no person is engaged for construction work and the builder/promoter/developer undertakes construction work on itsown without engaging the services of any other person, then, in such cases, in the absence

of a relationship of "service provider" and "service recipient", the question of providingtaxable service to any person by any other person does not arise. The relevant portion of 

the circular, dated August 1, 2006, is reproduced below :

Sl.No.

Issue Legal osition

1. Is "service tax" applicableon builder, promoter ordeveloper who builds a

residential complex with the

services of his own staff andemploying direct labour orpetty labour contractors

whose total bill does not

increase 4.0 lacs in onefinancial year ?

In a case where the builder, promoter ordeveloper builds a residential complex, havingmore than 12 residential units, by engaging a

contractor for construction of such residential

complex, the contractor shall be liable to pay"service tax" on the gross amount charged forthe construction services provided, to the

builder/promoter/ developer under "construction

of complex" service falling under Section65(105)( zzzh ) of the Finance Act, 1994.

If no other person is engaged for constructionwork and the builder/promoter/developer

undertakes construction work on his ownwithout engaging the services of any otherperson, then in such cases in the absence of 

service provider and service recipient

relationship, the question of providing taxableservice to any person by any other person doesnot arise.

38. The quoted portions of the abovementioned circular make it very clear that the activities

of the petitioner-company do not fall within the purview of taxable service so as to attract 

levy of service tax. In Commissioner of Income-tax v. Aspinwall and Co. Ltd. (1993) 204

ITR 225, the Kerala High Court has held that a circular of the Central Board of Direct Taxeshas the force of law and can even supplant the law in the cases, where it is beneficial to the

assessee and has mitigated or relaxed the rigour of the law." 

73. The Gauhati High Court also considered the decision of the Apex Court in the matter of 

K. Raheja Development Corporation case and held that the Apex Court therein wasconsidering the issue relating to sales tax and not the service tax.

74. After taking into consideration all the facts of the case, the Gauhati High Court in MagasConstruction case held that as there were no materials to show that the assessee was

constructing flats and apartments on behalf of the prospective allottees , it could not be said

that construction done by the assessee were the constructions undertaken by the assessee

for and on behalf of their prospective buyers/ allottees , and therefore, there was no serviceas such rendered by the assessee to the prospective allottees .

75. Referring to the case of K. Raheja Development Corporation , it has been held by theGauhati High Court that the agreement in that case provided that K. Raheja Development

Corporation, as developers on their own behalf as also as developers for those persons, who

would, eventually purchase flats, do the construction work and therefore, RahejaDevelopment Corporation were not only undertaking construction work on their own behalf but also on behalf of others who were prospective buyers. Reference was also made to the

decision of the Allahabad High Court in Assotech Reality (P) Ltd. vs. State of U.P ., reported

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in (2007-TIOL-297-HC-ALL-CT) = 2007 (7) STR 129, wherein it was held that when the assessee

construct flats/apartments not for and behalf of prospective allotees but otherwise, and the

subject title and interest in the construction continues to remain with the assessee till thedate of sale.

76. In Larsen & Toubros Ltd . case the Apex Court after considering the K. Raheja

Development case observed that it was difficult to accept the proposition laid down in K.Raheja Development case and that the view taken in the said decision requires re-consideration by the Larger Bench. The matter stands referred to a Larger Bench.

77. The discussion on the point in issue would be incomplete without reference to somemore decisions of the Apex Court, and they are Tamilnadu Kalyan Mandapam Associationvs. Union of India reported in ( 2004-TIOL-36-SC-ST  ) = 2006 (3) STR 260, Fakir Chand Gulati

vs. Uppal Agencies Private Limited reported in ( 2008-TIOL-147-SC-MISC  ) = 2008 (12) STR 401,

Home Solutions Retail India Limited vs. Union of India reported in 2009 (14) STR 433 =(2009- TIOL-196-HC-DEL-ST), Association of Leasing & Financial Service Companies (supra), All

India Federation of Tax Practitioners vs. Union of India reported in ( 2007-TIOL-149-SC-ST 

 ) 

Bharat Sanchar Nigam (supra) and Gannon Dunkerlays case.

78. In Tamilnadu Kalyan Mandapam Association case, the Apex Court while dealing with the

issue as to whether the High Court was correct in coming to the conclusion that theprovisions in the Finance Act, 1994 imposing service tax on the services rendered by the

Mandap Keeper were intra virus of the Constitution of India or not. After going through the

scheme of the said Act and various judgements relevant for the decision in the matter, itwas observed that the Mandap Keeper provide a wide variety of services apart from the

service of allowing temporary occupation of mandap . Apart from proper maintenance of the

mandap , they were providing the necessary paraphernalia for holding function, besides

providing condition and ambience required by the customers which included provision forlighting arrangements, furniture and fixtures, floor covering etc , decoration and organizing

catering services in the mandap . In fact, the logistic of setting up, selection andmaintenance was the responsibility of the Mandap Keeper. The services of Mandap Keeper

could not possibly be termed as a higher purchase agreement of a right to use goods orproperty. The services provided by Mandap Keeper are professional services which he alone

by virtue of his experience as the wherewithal to provide. However, temporary occupation

of mandap does not involve transfer of the property either under Transfer of Proper Act orotherwise. The nature and character of the service tax levied on Mandap Keeper is in

relation to transaction between the Mandap Keeper and his customer which is essentiallythat of providing a service.

79. In Fakir Chand Gulati case, the point for consideration before the Apex Court was

whether a land owner who enters into agreement with a builder for construction of anapartment building and for sharing of the constructed area is a consumer entitled to

maintain a complaint against the builder as a service provider under the Consumer

Protection Act, 1986. It was held therein that the basic underlying purpose of suchagreement is the construction of a house or an apartment in accordance with the

specification by builder for the owner, the consideration for such construction being the

transfer of undivided share in land to the builder and grant of permission to the builder to

construct two or more floors. Apart from consideration flowing from the land owner to thebuilder in the form of sale of undivided share in the land and permission to construct and

sell other floors of the building is to adjust the value to the extent of land to be transferredto the builder, the important aspect is the availment of services of the builder by the land

owner for house construction for a consideration. To that extent, the land owner would be aconsumer and the builder to be a service provider.

80. In Home Solution case, the point for consideration before the Apex Court [this was not adecision of the Apex Court but was that of the Delhi High Court-editor] was whether the

Finance Act, 1994 envisages the levy of service tax on letting out / renting out of 

immovable property per se. The Apex Court after referring to various relevant provisions of 

the said Act as well as taking into consideration the various reported decisions includingKalyan Mandapam Association case held that the Supreme Court in Kalyan Mandapam case

had held that the service of a Mandap Keeper does not involve transfer of movable propertynor does it involve a transfer of any immovable property of any kind known to law either

under the Transfer of Property Act or otherwise and therefore, the said activity could beonly classified as a service. It was further held that the observation of the Supreme Court in

Kalyan Mandapam case that the utilization of the premises as a mandap by itself would

constitute a service was required to be distinguished from the kind of activity that iscontemplated under Section 65 (105) (zzzz) of the said Act. The case of a mandap and

service provided by Mandap Keeper would not be applicable to a case of renting of 

immovable property simplicitor . It was further held that the service tax is a value addedtax. It is a tax on value addition provided by a service provider. It is, therefore, obvious that

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it must have connection with a service and there must be some value addition by that

service. If there is no value addition then there is no service. In so far as renting of 

immovable property for use in the course of or furtherance of the business or commerce isconcerned by itself does not entail any value addition and, therefore, cannot be regarded as

a service.

81. In Association of Leasing & Financial Service Companies the Apex Court was dealingwith the matter of an association of lending and financial companies. The Finance Act

provided for levy of service tax for banking and other financial services. Section 137 of theFinance Act, 2001 substituted Section 65 which defined banking and other financial services.Subsequently the definition underwent changes which were introduced by way of Section 90

of the Finance Act, 2004 and Section 135 of the Finance Act, 2007. The appellant filed writ

petition in the High Court challenging the levy of service tax imposed by Section65(12)(a)(i) of the said Act. During the pendency of the writ petition, the government

issued a Notification dated 1.3.2006 exempting 90% of the amount payable under higher

purchase/ equipment leasing agreements from service tax on the ground that the said 90%represented interest income earned by the service provider. By virtue of the amended

definition of the expression banking and other financial services, the transactions in the

nature of financial leasing, equipment leasing and hire-purchase had been sought to be

brought within the service tax net. The Apex court after taking note of various provisions of law observed that the Reserve Bank of India was constituted under RBI Act, 1934 inter-alia

to regulate the country's monetary system. Chapter III-B of the RBI Act deals with theprovision relating to non banking financial companies and financial institutions. Section 45-

I(c) of RBI Act treats financing as an activity. Those activities are regulated by Reserve

Bank of India. The expression financial institution means any non banking institution whichcarries on as its business and activity inter-alia of financing, whether by way of making

loans or advances or otherwise. Under notification dated 2.1.1998, the deposit takingactivities of non banking financial companies were also sought to be regulated. Similarly,

under RBI guidelines dealing with the accounting for investments, the non banking financialcompanies having not less than 60% of the total assets in lease and higher purchase and

deriving not less than 60% of their total income from such activities can be classified as

higher purchase/ equipment leasing companies. The Apex Court further observed that thesignificance of the said circulars and guidelines is to show that the activities undertaken by

non banking financial companies of equipment leasing and hire-purchase finance arefacilities extended by non banking financial companies to their customers. They are financial

services rendered by such non banking financial companies to their customers and they fallwithin the meaning of the words banking and other financial services which were sought to

be brought within the service tax net under Section 66 of the said Act. Referring to the Sale

of Goods Act and commentary of the said statute by Mulla , the Apex Court specificallyobserved that:

"a common method of selling goods is by means of an agreement commonly known as ahire-purchase agreement which is more aptly described as a hiring agreement coupled with

an option or purchase, ie . To say that the owner lets out the chattel on higher and 

undertakes to sell it to the hirer on his making certain number of payments. If that is thereal effect of the agreement there is no contract of sale until the hirer has made the

required number of payments and he remains a bailee till then. But some so-called hire-

 purchase agreements are in reality contracts to purchase, the price to be paid by instalments and in those cases the contract is a contract of sale and not of hiring. It 

depends on the terms of the contract whether it is to be regarded as a contract of hiring or a contract of sale." 

82. The Apex Court further observed that in All India Federation of Tax Practitioner's theApex Court had explained the concept of service tax and had held that the service tax is a

valued added tax which in turn is destination based consumption tax in the sense that it islevied on commercial activities and it is not a charge on the business but on the consumer.

And that the service tax is an economic concept based on the principle of equivalence in asense that consumption of goods and consumption of services are similar as they both

satisfy human needs. It was further held by the Apex Court that :-

"Today with the technological advancement there is a very thin line which divides a "sale" from "service". That, applying the principle of equivalence, there is no difference between

 production or manufacture of saleable goods and production of marketable/ saleable

services in the form of an activity undertaken by the service provider for consideration,which correspondingly stands consumed by the service receiver. It is this principle of 

equivalence which inbuilt into the concept of service tax under the Finance Act, 1994. That 

service tax is, therefore, a tax on an activity. That, service tax is a value added tax. Thevalue addition is on account of the activity which provides value addition, for example, an

activity undertaken by a Chartered Accountant or a broker is an activity undertaken by himbased on his performance and skill. This is from the point of view of the professional.

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However, from the point of view of his client, the Chartered Accountant /broker is his

service provider. The value addition comes in on account of the activity undertaken by the

 professional like tax planning, advising, consultation etc. It gives value addition to the goodsmanufactured or produced or sold. Thus, service tax is imposed every time service is

rendered to the customer/ client." 

The Apex Court further held that "every tax may be levied on an object or on the event of taxation. Service tax is, thus, a tax on activity whereas sales tax is a tax on sale of a thing

or goods." 

Having held so, it was also ruled that:

"A contract of sale is different from an agreement to sell and unlike other contracts,

operates by itself and without delivery to transfer the property in the goods sold. The word "sale" connotes both a contract and a conveyance or transfer of property. The law relating

to building contracts was well known when Gannon Dunkerlay's case was decided and under 

that law the supply of goods as part of the works contract was not a sale. Thus, theessential ingredients of the saleare agreement to sell movables for a price and property 

 passing therein pursuant to an agreement." 

83. Referring to the facts of the case of  Association of Leasing & Financial Servicecompanies, the Apex Court held that:

"the impugned levy relates to or is with respect to the particular topic of "banking and other 

financial services" which includes within it one of the several enumerated services, viz ,

financial leasing services. These include long time financing by banks and other financial institutions (including NBFCs). These are services rendered to their customers which comeswithin he meaning of the expression "taxable services" as defined in Section 65(105)( zm).

The taxable event under the impugned law is the rendition of service. The impugned tax isnot on material or sale. It is on activity/ service rendered by the service provider to itscustomer. Equipment Leasing/ Hire-Purchase finance are long term financing activities

rendered. Such amount is credited to the capital account of the lessor/ hire-purchase

service provider. It is the interest/ finance charge which is treated as income or revenueand which is credited to the revenue account, Such interest or finance charges together with

the lease management fee/ processing fee/ documentation charges are treated as

considerations for the services rendered and accordingly they constitute the value of taxableservices on which service tax is made payable." 

84. In Bharat Sanchar Nigam 's case the matter related to the state Legislative competencyto levy sale tax on the transaction, by which mobile phone connections are enjoyed by thecustomers, under Entry 54 List II of the Seventh Schedule to the Constitution. After taking

note of the consensus amongst the parties on the point that the "goods" element intelecommunication were the electromagnetic waves by which data generated by the

subscriber was transmitted to the desired destination and proceeding on the basis thatincorporeal rights may be "goods" for the purpose of levying sale tax, it was held that

electromagnetic waves are neither abstracted nor are they consumed in the sense that theyare not extinguished by their user. They are not delivered, stored or possessed. Nor are

they marketable. They are merely the medium of communication, what is transmitted is not

an electromagnetic wave but the signal through such means. The signals are generated bythe subscribers themselves. In telecommunication what is transmitted is the message bymeans of the telegraph. No part of the telegraph itself is transferable or deliverable to the

subscribers. It was ruled that "the electromagnetic waves are not 'goods' within the

meaning of the word either in Article 366(12) or in the State Legislation". It was furtherobserved that "it is not in the circumstances necessary for us to determine whether

telephone system including the telephone exchange was not goods but immovable property

as contended by some of the petitioners". It was further held that "a telephone service isnothing but a service. There is no sale element apart from obvious one relating to the hand

set if any. That and any other accessory supplied by the service provider in our opinion

remain to be taxed under the State Sales Tax Laws". It was also held that the nature of the

transaction involved in providing the telephone connection may be a composite contract of service and sale. It is possible for the State to tax the sale element provided there is a

discernible sale and only to the extent relatable to such sale.

85. In Gannon Dunkerley case it was held that if there is an instrument of contract which

may be composite in form in any case other than the exceptions in Article 366( 29.A ),

unless the transaction in truth represents two distinct and separate contracts and isdiscernible as such, then the State would not have the power to separate the agreement to

sell from the agreement to render service and impose the tax on sale. However, the said

finding was preceded by the reasoning that we are concerned herewith a building contract,and in the case of such a contract, the theory that it can be broken up into its component

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parts and as regards one of them it can be said that there is a sale must fail both on the

grounds that there is no agreement to sell materials as such, and that property in themdoes not pose as movables.

86. Plain reading of the decisions of the Apex Court would disclose that the Apex Court

clearly brought out the difference between sale and services. Besides it has been clearly

clarified that the taxable event under the said Act is the rendition of service. It is on theactivity conducted or service rendered by the service provider to its customer that attracts

the provisions of the said Act. The tax under the said Act cannot be levied on materials oron sale. Undoubtedly, in case of sale, if any services are rendered in the nature of 

processing fee or documentation charges, etc., that could form part of the services rendered

and may constitute the value of taxable service on which the service tax may be leviable. In

other words, sale, by itself, of immovable property, either developed or undeveloped, oreven alongwith construction therein, would not amount to rendering any service, either

taxable or otherwise. But at the same time, any service rendered in the form of 

documentation or the like, certainly the same could amount to rendering service and wouldattract the provisions of the said Act. It is, therefore, necessary for the department beforeclassifying an activity of service provider to be taxable service, to establish the factum of 

rendering of any such service by the service recipient to others in the course of sale of the

immovable property by such service recipient, and only then it could be said that the serviceprovider had provided Business Auxiliary Service by promoting or marketing such services

of the service recipient. Needless to say that to establish such facts, it is primarily necessaryto have a clear charge in that regard with the factual foundation in the show cause notice to

give proper and fair opportunity to the assessee to meet the case of the department and

thereupon to establish such charge in the course of adjudication proceedings. As far as thecase in hand is concerned, as already seen above in relation to the service aspect is

concerned, the allegation or charge in that regard relates to the sale of immovableproperties or the developed properties or the constructed project by Sahara Corporation. It

does not relate to any service rendered by Sahara Corporation to others in relation to thesale of such properties or projects.

87. The relevant material to support the allegation regarding rendering of business auxiliaryservice by the appellants to Sahara Corporation brought on record is the factum of display

of logo of Sahara Corporation on various items specified in the agreement. The logo

undoubtedly discloses the name Sahara. Based on that, it has been held by theCommissioner that it amounts to brand promotion of Sahara Corporation. Apart from the

said conclusion, undoubtedly it has also been held that the display of logo resulted in

promotion and marketing of the construction and development services rendered by SaharaCorporation. However, the records nowhere disclose nor there is any reference to any such

record in the impugned order which could reveal rendering of any service pertaining to the

construction activity or development activity by Sahara Corporation to others. As alreadyobserved above, in order to classify an activity as service to others, there has to be serviceprovider and service recipient and the service provider shall engage himself in an activity

which would give some benefit to the service recipient. Obviously, in order to bring such

activity of service provider within the said category of taxable service, it has necessarily tobe in relation to some service provided by service recipient to others. Therefore, the

construction and development activity has to be shown to have been carried out for others

by Sahara Corporation in order to show that such activity of Sahara Corporation waspromoted or marketed by the appellants. Neither the records disclose nor the impugned

order anywhere refers to any such material which could reveal Sahara Corporation having

carried out construction or building activity for others. All throughout it has been the

contention of the appellants that the development and construction activity by SaharaCorporation had been for themselves and they had been merely selling the developed or

constructed properties. As already observed above sale of developed or constructed

property does not involve service element. Being so, apart from traveling beyond the scope

of the show cause notice, undoubtedly, the department has failed to produce any evidence

regarding the basic ingredient of Section 65(19)(ii) of the said Act so as to justifyclassification of whatever activity carried out by the appellants in the form of display of logo

being classifiable under the category of business auxiliary service.

88. Merely because the debit notes speak of charges being paid for the services according tothe agreement between the parties that by itself would not be sufficient to conclude that the

activity in the form of display of logo would be the business auxiliary services within the

meaning of the said expression, unless it is established that the activity of Sahara

Corporation is service to others and the activity of display of logo has resulted in promotionand advertisement of such service of Sahara Corporation. The contention that the appellants

have not produced any evidence to show that logo did not promote the business is totally

devoid of substance in as much as that the burden to prove the classification and to bringthe assessee within the net of tax primarily lies upon the department. Failure of the

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department to establish the basic ingredient to prove the charge against the assessee canneither shift the burden, nor can give any advantage to the department.

89. Another important point sought to be canvassed relates to the entry relating to sale of 

space or time for advertisement and a brand promotion under entry 65(105) (zzzzq) and 65

(105) (zzm). It is sought to be argued that when a subsequent entry is enacted with specific

and precise description of an activity without changing the existing entry, it is to bepresumed that such existing entry did not cover the newly enacted entry or the activity

covered by newly enacted entry. The point is sought to be made good by referring to thedecision in the matter of Board of Control for Cricket Control in India vs. Commissioner

reported in ( 2007-TIOL-684-CESTAT-MUM  ) = 2007 (7) STR 384; Spandrel vs. C.C.E . reported in

( 2010-TIOL-830-CESTAT-BANG  ) = 2010 (20) STR 129; IBM India Pvt. Ltd. Vs. Commissioner

reported in ( 2010-TIOL-167-CESTAT-BANG  ) = 2010 (17) STR 317, Commissioner vs. IBM IndiaPvt. Ltd. reported in = 2010 (18) STR 137; State of Tamil Nadu vs. M.K . Kandaswami

reported in (1975) 4 SCC 745. On the other hand, it is contended by the DR that the

proposition sought to be canvassed on behalf of the assessee is without any basis besidesthe fact that the activities undertaken by them are clearly covered by the definition of theexpression Business Auxiliary Service and the same is evident from the agreement dated

30.03.1995. In that regard, attention was sought to be drawn to the decision of the Apex

Court in Union of India and Another vs. Devki Nandan Agarwal reported in AIR 1992 SCC 96while contending that when the language is clear the intention is to be gathered from the

language used and the Courts cannot enlarge or abridge the scope of legislation.

90. As rightly pointed out by the learned Advocate for the appellants, in the letter dated10.09.2004 in relation to the budgetary changes brought in w.e.f . financial year 2004-05

relating to the service tax, para 13.1 of the said letter under the caption constructionservices (commercial and industrial place or civil structures) it was observed that

"Services provided by a commercial concern in relation to construction, repairs, alteration or 

restoration of such buildings, civil structures or parts thereof which are used, occupied or engaged for the purposes of commercial and industry are covered under this new levy. In

this case the service is essentially provided to a person who gets such constructions etc done, by a building or civil contractor. Estate builders who construct buildings or civil 

structures for themselves (for their own use, renting it out or for selling it subsequently) are

not taxable service providers. However, if such a real estate owners hire contractor/ contractors, the payment made to such contractor would be subjected to service tax under 

this head. The tax is limited only in case the service is provided by a commercial concern.Those, service provided by a labourer engaged directly by the property owner or a

contractor who does not have a business establishment would not be subject to servicetax." 

The contents of the above quoted para from the said letter apparently disclose that it was

the understanding of the Government itself that if the builders construct the building or

construct for themselves either for their own use or to rent it out or for selling itsubsequently, then they do not render any taxable service as such. In other words the saleof an immovable property does not include service element and that is the understanding of 

the Government itself which is revealed from the said letter.

91. Equally the learned Advocate for the appellants is justified in referring to the Circular

dated 26.02.2010. Therein under the caption "service tax on construction services" in para8.2 it was stated thus:-

"As regards payment made by the prospective buyers / flat owners, in few cases the entireconsideration is paid after the residential complex has been fully developed. This is in the

nature of outright sale of the immovable property and admittedly no service tax is

chargeable on such transfer. However, in most cases, the prospective buyers books a flat before its construction commencement, completion, pays the consideration in instalments

and takes possession of the property when the entire consideration is paid and theconstruction is over." 

After taking note of different patterns of execution of agreement, terms of payment and

legal formalities which had given rise to confusion, dispute and discrimination in relation tothe objection to pay the service tax, it was observed in the said letter thus:-

"In order to achieve the legislative intent and bring in parity in tax treatment an explanationis being inserted to provide that unless the entire payment for the property is paid by the

 prospective buyer or on his behalf after the completion of construction (including its

certification by the local authorities), the activity of construction would be deemed to be a

taxable service provided by the builder/ promoter / developer to the prospective buyer and 

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the service tax would be charged accordingly. This would only expand the scope of theexisting service, which otherwise remain unchanged" 

Undoubtedly, the circular was referring to the service tax on construction services and not

relating to business auxiliary services. Even otherwise, it was neither in the show cause

notice nor there is any evidence on record which could reveal that the Sahara Corporation

had been carrying out construction activities for others whereby the entire payment of thesaleable property items was not paid after completion of the construction but was being

paid in installments as and how the construction activity had been in progress. There isneither such allegation nor any proof in that regard.

92. The said circular is also relevant in relation to the contention on behalf of the appellantsthat the specific inclusion of a particular type of services in the said Act would disclose that

type of service was not included in the taxable service prior to its specific inclusion. Para 2.1

of the said circular under the caption "new services included in the list of taxable services"states that "Eight services, hitherto not included separately within the list of taxable

services, are being included in the said list through appropriate amendments in sub-section

(105) of Section 65 of the Finance Act, 1994. One of them, namely promotion, marketing

etc. of lottery and similar games of chance presently figures as part of Business AuxiliaryService (BAS). This is now being introduced as an independent entry in the list of taxable

services" Referring to this observation, it is sought to be contended and not without

 justification that display of logo could not be said to be part of business auxiliary services asin relation to the display of logo there is a specific entry introduced under the amendment

brought in the year 2010. Referring to the caption "promoting a brand of goods service evenbusiness entity etc. attention was drawn to para 4.2 of the said circular. Indeed it clearly

states that "it is important to note that promotion or marketing of sale of goods produced,provided or belonging to a client and promotion or marketing of services provided by the

client are already covered under the business auxiliary services. Such activities would

continue to remain classified under BAS. The difference between the services classifiableunder BAS and the newly proposed service is that the latter has a wider coverage in the

sense that mere promotion of a brand would attract tax under this service even if such

promotion cannot be directly linked to promotions of a particular product or service".

93. The above observation in the circular clearly discloses that in order to classify any

activity to be the service in the nature of business auxiliary service, the same should berelating to the promotion or marketing of some activity of the service recipient which should

be in the nature of service provided to its clients. Mere promotion of a brand by itself didnot amount to promotion or marketing of services till specific entry in that regard was made

in the said Act and that was the understanding of the law makers. To bring into the tax neteven mere promotion of a brand, the new entry was introduced in the said Act. It is only

consequent to the said entry that mere display of brand could amount to promotion of 

services rendered by the client and not otherwise. Being so, the appellants are also justifiedin contending that mere display of log could not bring the case within the parameters of 

business auxiliary service under the said Act during the relevant period.

94. It is however sought to be contended that Government never intended the introduction

of eight services in the year 2008 to be totally new services as such and the same is

apparent from the letter dated 26.2.2010 by Joint Secretary from Finance Ministry to all theCommissionerates in relation to the amendment brought about to the Finance Act in the

year 2008. In that regard, attention was sought to be drawn to para 2.1 of the said letter,while contending that it was specifically stated therein that one of the entries made in 2008

was already covered by the entry Business Auxiliary Service

95. It is true that para 2.1 of the said letter reads that "One of them, namely promotion,marketing etc. of lottery and similar games of chance presently figures as part of BusinessAuxiliary Service (BAS). This is now being introduced as an independent entry in the list of 

taxable services". The said statement however is preceded by specific assertion to the effect

that "Eight services, hitherto not included separately within the list of taxable services, are

being included in the said list through appropriate amendments in sub-section (105) of Section 65 of the Finance Act, 1994". However, the letter further records as under:

"The difference between the services classifiable under BAS and the newly proposed service

is that the latter has a wider coverage in the sense that mere promotion of a brand would attract tax under this service even if such promotion cannot be directly linked to promotions

of a particular product or service." 

96. Evidently the new entry deals with a specific subject which relates to promotion of a

brand even though the same may not directly have any link to the promotion of the service

itself. Evidently, therefore, the original entry Business Auxiliary Service did not include theactivity in the form of promotion of brand unconnected with the promotion of particular

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service as part of the activity under the said category. The letter therefore rather then

lending any support to the defence by the department, it conveys the meaning of theexisting entry to be contrary to the arguments advanced on behalf of the department.

97. In Board of Control for Cricket Control in India, the Tribunal while dealing with the entry

"sale of spare or time for advertisement and sponsorship services" which was introduced in

the said Act w.e.f . 1.5.2005 had observed that we find that a subsequent entry havingbeen enacted covering the activity without any change of the existing entry, has to be

interpreted as if the earlier existing entry did not cover the subsequently created entry. If the subsequent entry was covered by the earlier entry, there is no reason or scope to create

the present entry specially when the rate of tax in respect of both the entries remains

unchanged. Certainly, creation of new entries was not by way of bifurcation of earlier entry

inasmuch as the earlier entry relating to advertisement remains unchanged without anychange in the tax rate. As such, the introduction of new tariff entry would imply that the

coverage in the new tariff for the purposes of tax was out of the scope of the earlier entry.

It was so held in the case of Glaxosmithkline Pharmaceuticals Limited vs. CCE , Mumbai-IVreported in (2004-TIOL-786-CESTAT-MUM) = 2006 (3) STR 711 (Tri.) = 2005 (188) ELT 171 (Tri.Mum.) as also in the case of M/s Zee Telefilm and M/s Star India Private Limited vs. CCE ,

Mumbai reported in (2006 TIOL-945-CESTAT-MUM). If it is held that the activities of sponsorship

and sale of space were covered under the earlier heading of advertising agency, the samewould lead to redundancy of new legislation and would defeat legislative intent.

98. In Spandrel , having noted the amendment which were introduced under Finance Act,

2005 which came into force from 16.06.2005 in relation to services "Commercial orIndustrial Construction" under Section 65 ( 25b ) of the Finance Act, 1994 it was observed

that "it can be seen from clause (c ) of Section 65 ( 25b ) that the services which have beenbrought under the net of Finance Act for the first time within the category of Commercial

and Industrial Construction service the Board had issued clarification under letter dated27.7.2005. The relevant portion of which reads thus:

"Post construction completion and finishing services such as glazing, plastering, painting,

floor and wall tilting, wall covering and wall papering, wood and metal joinery and carpentary , especially if undertaken as an isolated or stand alone contract, are also

specifically included. Thus post construction completion and finishing services arespecifically included in the definition of commercial or industrial construction service." 

Referring to the above clarification it was held that It can be seen from the above that theactivities which had been sought to be subjected to service tax were brought under the netof service tax specifically by inclusion thereof by virtue of the amendment brought to the

said act w.e.f . 16.6.2005. This has been held to indicate that prior to 16.06.2005, such

services were not included in the category of interior decorator service. It was furtherobserved that in series of decisions of the Tribunal which laid down law that if the category

of series is brought into service net from a specific data, such services would not be covered

under any other category of services. Reliance is placed in the decision in the matter of Chennai Telephones ( BSNL ) vs. Commissioner of C. Ex. Chennai reported in ( 2004-TIOL-53-

CESTAT-MAD ) = 2006 30 STR 227 wherein it was held that levy of leased circuit service was

introduced only from 16.7.2001 and, therefore, it was not proper to demand service tax on

the said services for the earlier period. Reference was also made to the case of Jet Airways(India) Ltd. vs. Commissioner of Service Tax, Ahmedabad reported in ( 2008-TIOL-979-CESTAT-

 AHM  ) 2008 (11) STR 645 (Tri. Ahmd .) wherein it was held that once a new entry isintroduced with effect from a particular date without disturbing already existing entries, it

has to be held that new entry was not covered by the previous entry. The Tribunal thereinhad relied upon its earlier decision in the matter of Board of Control for Cricket in India vs.

C.S.T . Mumbai ( 2007-TIOL-684-CESTAT-MUM  ) = 2007 (7) STR 384 (Tri. Mumbai). In short, it

was held that once it is clear from the record that the activities undertaken are enumeratedunder a specific entry which came into force w.e.f . 16.06.2005 it would disclose that prior

to the introduction of the said entry such activities were not included in any other category.

99. In the case in hand, it cannot be disputed that the entry under Section 65 (105) (zzzzq)was introduced pursuant to Finance Act, 2008 and w.e.f . 16.5.2008. The said entry was to

the effect that taxable service means any service provided or to be provided to any personby any other person through a business entity or otherwise under a contract for promotion

or marketing of a brand of goods, service, event or endorsement of name including a tradename, logo or house mark of a business entity by appearing in advertisement and

promotional event or carrying out in promotional activity of such goods service or event.

The explanation thereto provides that for the purposes of the said sub clause brand includessymbol, monogram, label, signature or invented words which indicate connection with the

such goods service event or business entity. Simultaneously it is to be noted that the clause

under Section 65 (105)( zzb ) to the effect that the taxable service means any serviceprovided or to be provided to a client by person in relation to Business Auxiliary Service was

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not disturbed. In other words, the entry relating to a contract or promotion and marketing

of a brand including logo was introduced for the first time in the statute book w.e.f .

16.05.2008. While doing so, the earlier entry regarding Business Auxiliary Service was notdisturbed in any manner. Applying the settled principle of law that with the introduction of 

new entry without any bifurcation of the old entry and without disturbance of any old entrywould disclose non inclusion of the subject of the new entry in the old existing entries to the

matter in hand, it would be evidently clear that during the relevant period the activity of promotion or marketing of logo or a brand of service of the client was not forming part of 

the Business Auxiliary Service.

100. In IBM India while dealing with the point regarding leviability of service tax under the

category of management consultancy service in respect of ERP implementation services it

was observed that the department had attempted to classify the ERP services undermanagement consultancy "service" while the Tribunals decision were categorical on the

point that such services would fall under the category of consulting engineering services.

However, they were excluded from the scope of consulting engineering services by virtue of an exemption Notification No. 4/99-ST dated 28.2.1999. It was observed that once aparticular service is excluded from the scope of the service tax where it normally is

supposed to fall then it cannot be taxed under some other category. While observing that

the assessee had clearly shown that prior to 16.5.2008, the services rendered by theassessee were excluded from the scope of consulting engineers service, the judicial

pronouncement disclosed that it was not covered under the management consultancyservices and as the information technology services came within the framework of the

service tax only from 16.5.2008, therefore, it was held that the services in question for the

relevant period could not have been subjected to payment of service tax. The said decisionwas not interfered with by the Apex Court as the appeal was dismissed.

101. Indeed the appellants are justified in contending that the entry relating to brand

promotion under Section 65(105)(zzzzq) was introduced w.e.f . 26.02.2010. This obviouslyshows that the brand promotion was not included in the category of business auxiliary

services prior to the said date. It is settled law that the charge created by introducing a new

entry and consequently taxability thereupon, the question of imposing the dutyretrospectively does not arise. The statutory provision did not provide brand promotion to

be a taxable service during the relevant period.

102. As regards the entry under Section 65(105)(zzzm) relating to sale of space, the same

was introduced in the year 2006. However, there was no charge under the said entryagainst the appellants. It is not for this Tribunal to deal with the issue as to whether display

of logo would fall in this category or not. It is neither the case of the department nor therecords justify reference to the said entry to justify the claim of the department on that

ground.

103. There can hardly be any quarrel about the proposition that introduction of specific

entry does not mean that the subject covered by the specific entry was not covered bygeneral entry prior to the introduction of specific entry. But that is not the case in the

matter in hand. In our case, the earlier entry speaks of Business Auxiliary Services of the

client, whereas the subsequent entry speaks of display of logo per se to be amounting to

promotion and advertisement of the business activity of the client. In relation to the earlierentry, the activity conducted by the service provider should disclose promotion and

marketing of the service rendered by the service recipient to the others and there must betangible evidence to establish the same. In case of subsequent entry mere fact of display of 

logo of the service recipient would lead to presumption about promotion and advertisementof the business of the client. Such a presumption is not available in case of earlier entry.

104. Perhaps, the contention that the appellants were required to prove that the display of logo was not helpful to promote real estate business when the source of information was

given to the passengers for promoting and marketing the project of Sahara Corporation

would have some relevancy if the period involved was subsequent to the new entry

regarding brand promotion, but certainly irrelevant for the relevant period as for the saidperiod, taking into consideration the nature of the entry, it was for the department to

establish the positive effects of display of logo and it was not for the assessee to prove thenegative. The burden to establish the charge was squarely upon the department which it

failed to discharge.

105. In Martin Lottery while dealing with the question as to whether sale promotion and

marketing of lottery tickets would be exigible to service tax within the meaning of the

provisions of Section 65(105) of the Finance Act, 1994, reference was made to theexplanation clause inserted in the sub-clause (ii) of Section 65(19) w.e.f . 16.5.2008. The

explanation provides that for removal of doubt it is hereby declared that the purposes of this sub-clause service in relation to promotion or marketing of service provided by the

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client includes in service provided in relation to promotion or marketing of games of chance,

organized, conducted or promoted by the client, in whatever name called, whether or not

conducted online, including lottery, lotto, bingo. Having referred to the said explanationclause, it was observed that the core question which arises for consideration is as to

whether the explanation appended to sub-clause (ii) of Section 65(19) is clarificatory ordeclaratory in nature so as to be construed having retrospective effective operation. The

Apex Court then proceeded to observe that the service tax purports to impose tax onservices on two grounds (1) service provided to a consumer and (2) service provided to a

service provider. The service provided in respect of the matters envisaged under clause (19)of Section 65 of the Act must be construed strictly. The decision lends support to the view

that we are taking in the matter in hand.

106. In Motors & General Stores while dealing with the issue as to whether a transaction inthe said case amounted to sale or not and held that the taxing statute has to be applied in

accordance with the legal rights of the parties to the transaction. When the transaction is

embodied in the document, the liability to tax depends upon the meaning and content of thelanguages use in accordance with the ordinary rules of construction.

107. The above discussion inevitably leads to the conclusion that the adjudicating authority,for the reasons disclosed herein above, did travel beyond the scope of the show cause

notice while deciding the matter. The activity for which the appellants were charged was

undoubtedly relating to the promotion and marketing of the activity of Sahara Corporationand to that extent, the same was clearly spelt out in the show cause notice. Equally, it is

established that the said charge was attempted to be established by producing the evidencein the form of display of logo of Sahara Corporation by the appellants on the materials as

described in the agreement dated 30.3.1995 between the parties. Apart from display of logo, no other material was placed on record in relation to the activity of the appellants for

Sahara Corporation. The activity of Sahara Corporation alleged in the show cause notice and

established from the records is to the effect that Sahara Corporation was engaged in thebusiness of development of immovable properties and building projects for sale to others

and for the purpose of sale, the passengers traveling from the appellants airlines were

sought to be targeted and that on the agreement in that regard, the appellants displayedthe logo of Sahara on the materials agreed upon and that for such activity by the appellantsthey were paid money calculated on the basis of number of passengers traveled through the

said airlines and the charges were revised upward from time to time by mutual consent. Theactivity of the appellant having comprised of mere display of logo of Sahara Corporation on

various items as agreed, and the entry relating to mere display of logo resulting in

promotion and marketing of the business of the client having been introduced subsequent tothe relevant period, it could not be said to have been part of Business Auxiliary Service

during the relevant period and in any case the activity of Sahara Corporation being in the

nature of sale of immovable properties either developed and/ or constructed or builtpremises therein did not amount to rendering "services" as such, either taxable or

otherwise, to others, within the meaning of the expression used in the category of Business

Auxiliary Service under the said Act, the said activity by the appellants does not fall within

the category of Business Auxiliary Service under the said Act, and hence there was noliability upon the appellants to pay any service tax for such activity by them during the

relevant period under the category of BAS of the said Act. The authority below clearly erred

in imposing such liability upon the appellants. The first three points for consideration asformulated above accordingly stand answered.

108. In view of conclusions as above, it is not necessary, rather it does not require theTribunal to deal with other issues like absence of jurisdiction, bar of limitation, and liability

for interest or penalty, since they do not arise in the facts and circumstances of the case asstated above.

109. Before we part with the matter, it is to be noted that reliance has been placed in

number of decisions, though, none of those are relevant for the issue involved in thematter. They relate to totally different issues and were delivered in totally different set of 

facts.

110. In Tamil Nadu Housing Board , it was held that when the law requires an intention toevade payment of duty then it is not mere failure to pay the duty but it must be something

more to warrant imposition of penalty. That is, the assessee must be aware that the dutywas leviable and it must deliberately avoid paying it. The word evade in the context means

defeating the provision of law of paying duty. In other words the assessee must deliberatelyavoid payment of duty which is payable in accordance with provision of law.

111. In Systems and Components Private Limited , the Apex Court held that the Tribunal

had noted the technical details supplied by the respondent in the case and the letter of thesaid respondent dated 30.11.1993 was giving details of how the parts were used in chilling

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plant. Yet the Tribunal had held that there was no sufficient case put forth by way of 

defence in support of their allegation that they were specifically designed for the purpose of 

assembling the chilling plant. Setting aside the said order of the Tribunal, the Apex Courtobserved that once it is an admitted position by the party itself, that those were the parts of 

chilling plant and the concerned party did not even dispute that they have no independentuse, the burden did not stand discharged by the Department.

112. In Tata Consultancy Services , it was held that in interpreting an expression used in a

legal sense, the Courts are required to ascertain the precise connotation which is possessedin law. A Court should not be overzealous in searching ambiguity or obscurity in words

which are plain. When an expression is capable of more than one meaning, efforts should be

to resolve that ambiguity in a manner consistent with the purpose of the provisions and

having regard to the consequences of the alternative construction. So long as naturalmeaning of charging section is adhered to and law is certain, then a strange meaning

thereto should not be given. It was further held that a "goods" may be tangible property or

an intangible one. It would become goods provided it has the attributes thereof havingregard to (a) its utility; (b) capable of being bought and sold; and (c ) capable of being

transmitted, transferred, delivered, stored and possessed. If a software whether customizedor non- customised satisfies these attributes, the same would be goods.

113. In Star India Private Limited, the Apex Court held that a definition of a term in one

statute cannot be used as a guide for construction of a same term in another statutesparticularly in a case where statute have been enacted for different purposes.

114. In Slotco Steel , it was held by the Tribunal therein that if the party itself fails either byway of some positive act in that regard or even by failure to take appropriate steps to

ensure the exercise of the right in time, the party then is not entitled to blame others andlament failure of natural justice.

115. In Cosmic Dye Chemical it was held that there cannot be suppression or mis -statement of fact when it is not willful and, therefore, it would not constitute a permissible

ground for the purpose of proviso to Section 11A of the Central Excise Act, 1944.

116. In Devi Dass Garg , the Tribunal held that the standard of proof required in theDepartmental proceedings under the provisions of the Customs Act, 1962 or Central Excise

Act, 1944 or of the Rules made thereunder, for confiscation of goods, confirmation of demand for duty evaded, and imposition of penalty is the preponderance of probabilities and

for establishing the preponderance of probabilities, the adjudicating authority or theTribunal has to evaluate the evidence of both the sides and decide what is most probable.

117. The decision of the Tribunal in Telco case, was in relation to the permissibility of taking

resort to the dictionary meaning in the absence of definition of a particular word in astatute.

118. In Jayshree Engineering Company case, it was held that the penalty was imposable if there was deliberate suppression or wrong statement by the assessee.

119. In Krishna Podwal case, it was held by the Kerala High Court that penalty is imposableunder Section 76 on account of failure to pay the service tax by the person liable to pay the

same in accordance with provisions of law. Section 78 relates to penalty for suppression of 

value of taxable service. The violation under two different provisions may occur in thecourse of same transaction or from the same act of the person concerned. Incidence of 

imposition of penalty are distinct and separate under two provisions and even if the offences

are committed in the course same transaction or arise out of the same act, the penalty isimposable for ingredients of both the offences. There can be a situation where even when

there is suppression of the value of taxable service, a person can be liable to pay service taxand yet fails to pay the same. Therefore, penalty can certainly be imposed on erring personunder both the sections. Especially since the ingredients of the two offences are distinct and

separate.

120. In Positive Packaging Industries case, it was held that acquiring knowledge by thedepartment does not take away the period of five years provided by the law makers in the

Act itself, particularly when the suppression of fact is with intent to evade the payment of duty.

121. In Kerala State Electricity Board case, the Apex Court held that the provisionsregarding the liability to pay the interest is enforceable if the person liable to pay the

service tax fails to pay the same when it falls due.

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122. In Lubri-Chem Industries vs. Collector of Central Excise, Bombay reported in ( 2002-

TIOL-430-SC-CX  ) = 1994 (73) ELT 257 (SC), it was held that the extended period of five years

is not to be invoked unless there is something more positive then mere inaction or failure onthe part of the assessee or conscious or deliberate withholding of information.

123. In State of Tamil Nadu vs. M.K . Kandaswami and Others reported in (1995) 4

Supreme Court Cases 745 it was ruled that while interpreting taxing statute a constructionwhich would defeat its purpose and effect should be avoided and if more than one

construction is possible, then the one which preserves its workability and efficacy is to bepreferred.

124. In Indo-China Steam Navigation case it was held that where two reasonableconstructions are possible but one leads to an anomaly while the other advances the

intention of the legislature, then it is the duty of the Court to accept the latter construction.

125. In Mechanical Constructions it was held by the Tribunal that if the party does not make

any attempt to appreciate itself of the correct position in law, it cannot be a ground to saythat it did not know that it was liable to pay the duty or to contend that the belief was

genuine and bonafide .

126. In Rajasthan Spinning & Weaving Mills case it was ruled that once the Section 11AC isapplicable, the authority would have no discretion in quantifying the amount and penalty

must be imposed equal to the duty determined. The decision was essentially in relation tothe issue of penalty.

127. The decision in Padmini Products and Guffic Pharma are in relation to thecircumstances under which the extended period of limitation can be invoked.

128. In the result, the appeal succeeds. It is allowed. The impugned order and the demandthereunder is hereby quashed and set aside. The appeal accordingly stands disposed of with

consequential relief.

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