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: 27.7.2009 Passed 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., Rakesh Mohan, I O, ADR ( DRs ) CORAM: R M S Khandeparkar , President Rakesh Kumar, Member (T) Service Tax BAS Promoting Real Estate in the Air - Displaying logo of Sahara which 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 any service, 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 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. Adjudicating Authority cannot travel beyond SCN ; the adjudicating authority, did travel 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 to produce any evidence regarding the basic ingredient of Section 65(19)(ii) of the said Act so as 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 can give 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. The burden 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 and consequently 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 settled principle 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)

3. Assistant Commissioner of C.Ex . vs. Krishna Poduval -

(2006-TIOL-77-HC-KERALA-ST) (2010-TIOL-87-SC-LB)

4. Association of Leasing and Financing Company vs. UOI 5. Assotech Reality (P) Ltd. vs. State of U.P 6. Bharat Sanchar Nigam Ltd. vs. UOI -

(2007-TIOL-297-HC-ALL-CT)

(2006-TIOL-15-SC-CT-LB) (2007-TIOL-684-CESTAT-MUM)

7. Board of Control for Cricket Control in India vs. Commissioner-

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) (2004-TIOL-53-CESTAT-

10. Chennai Telephones ( BSNL ) vs. Commissioner of C. Ex. Chennai MAD)

11. Cosmic Dye Chemical vs. C.C.E ., Bombay 12. Devi Dass Garg vs. C.C.E ., Delhi I -

(2002-TIOL-236-SC-CX)

(2010-TIOL-1502-CESTAT-DEL) (2008-TIOL-147-SC-MISC) (2004-TIOL-786-CESTAT-

13. Fakir Chand Gulati vs. Uppal Agencies Private Limited -

14. Glaxosmithkline Pharmaceuticals Limited vs. CCE , Mumbai-IV MUM)

15. Home Solutions Retail India Limited vs. Union of India-

(2009- TIOL-196-HC-DEL-ST) (2006-TIOL-195-SC-MISC)

16. Hotel & Restaurant Association vs. Star India Pvt. Ltd. 17. HPL Chemicals vs. C.C.E .-

(2006-TIOL-37-SC-CX) (2010-TIOL-167-CESTAT-BANG) (2009-TIOL-150-HC-MUM-ST) (2008-TIOL-979-

18. IBM India Pvt. Ltd. Vs. Commissioner -

19. Indian National Shipowners Association vs. UOI -

20. Jet Airways (India) Ltd. vs. Commissioner of Service Tax, Ahmedabad 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 24. Lubri-Chem Industries Ltd. Vs. Collector (2008-TIOL-186-SC-CT)

(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) (2010-TIOL-1369-CESTAT-MUM)

27. Positive Packaging Industries Ltd. vs. C.C.E ., New Panvel 28. Spandrel vs. C.C.E .

(2010-TIOL-830-CESTAT-BANG) (2002-TIOL-493-SC-CT-LB)

29. State of Madras vs. Gannon Dunkerley and Co. (Madras) Ltd. 30. Tamil Nadu Housing Board vs. C.C.E ., Madras -

(2002-TIOL-288-SC-CX) - (2004-TIOL-36-SC-ST)

31. Tamilnadu Kalyan Mandapam Association vs. Union of India 32. Tata Consultancy Services vs. State of Andhra Pradesh 33. UOI vs. Martin Lottery Agencies Ltd. -

(2004- TIOL -87-SC-CT- LB)

(2009-TIOL-60-SC-ST) (2009-TIOL-63-SC-CX)

34. UOI vs. Rajasthan Spinning and Weaving Mills -

35. Zee Telefilm and M/s Star India Private Limited vs. CCE , Mumbai CESTAT-MUM)

(2006 TIOL-945-

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 the parties. 2. This appeal arises from the order dated 27.7.09 passed by the Commissioner of Central Excise, 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/- under Section 77 of the said Act, 1994. 3. On the basis of information received by the Department that M/s Sahara Airlines Limited having 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 30.3.1995 but 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 various statements 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 to have 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 appellants and 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 Sahara Airlines Ltd," unless otherwise the context requires. 4. While confirming the demand of service tax against the appellants, the learned Commissioner 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 the appellants 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 logo of 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 engaged not 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 their predecessors 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 any service being provided by Sahara Corporation which could justify the charge against the appellants of having provided Business Auxiliary Services to Sahara Corporation has been rejected 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 was not 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 the appellants had provided taxable service under the category of Business Auxiliary Services, whether the extended period of limitation was invokable , whether the gross amount charged was to be considered as inclusive of service tax and whether the payment of interest was warranted.

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 the group 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 in question 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 rendered service 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 the Agreement 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 the said 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 the entries 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 the construction 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 time barred 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 notice satisfied 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 submitted that 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, the foundation 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 to the 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 to establish 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 nature of display of logo on the tickets, boarding passes, baggage tags etc. and on the Aircraft, and copy 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 said view gets support from Appendix X of Hand Book of Procedure of Foreign Trade, that the real estate services of construction/development of residential and commercial projects would 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 for various services and further that for the purpose of classifying of service under the business auxiliary 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 mere reproduction 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-SCCUS) = 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 cause notice merely reproduced the agreement in support of charge of failure to pay the service

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 to the 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 such analysis 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 further submitted 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 party to 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 business activities of Sahara Corporation. The records placed before the authorities clearly established that, besides the sale of immovable properties, Sahara Corporation was providing 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 purpose of 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 agreement clearly 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 the agreement provides for obligation of the appellants and popularize the schemes of the business 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, the DR 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, submitted that 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 beyond the 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 in terms 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 were never 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 referred to 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 been promoted 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 promotion or 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 marketing activities are to be classified as the business auxiliary services. It is specifically confined to the 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 Auxiliary Services 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 not qualify 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 was reiterated 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 entries relating 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

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 determine whether 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 the purchase 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 received prior 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 transaction of 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 such activity 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 new charge and obviously, therefore, prospective in nature. It is settled law that the amendment creating new charge cannot be enforced retrospectively. As the explanation has been inserted 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 the relevant 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-TIOL77-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 the Hon'ble Supreme Court in Larsen & Toubro Ltd. Vs. State of Karnataka reported in (2008TIOL-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 service provided 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 activity which 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 the agreement 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 Sahara Corporation. 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 the appellants for promoting their business and in consideration thereof, the appellants were to receive 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 clearly disclose 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 providing services of promotion of publicizing of business activities of service recipient whereas the latter was rendering services in the nature of construction and development activity. He further 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 the development 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 carried out by the Sahara Corporation did not involve service element. He further submitted that introduction 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 because the 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 is accepted, 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 those statements 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 helpful to 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

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 purpose is 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 but essentially 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 contended on 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 the fact 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 cannot be 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-MUMST) = 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 Court in 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 no consideration. 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 the relevant 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. Entry relating 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 or material 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 misstatement of 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-TIOL288-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) ELT 187; 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 to invoke 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 and the 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 infrastructure and 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 from Chartered 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 to be 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 appellants submitted that the issue involved in the case is of classification of services which is related

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 evidence was 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 letters and 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 while contending 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 relevant evidence. 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 in Delhi 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 to be raised in the matter. 17. Lastly, the appellants seek to dispute the liability of interest and penalty. According to the 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 such activity 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.); Devi Dass 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 reported in (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 Dunkerley and 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 to consider 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 by sufficient 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 said expression 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?

(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 or whether 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 to deal 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 as well 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 the appellants 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 the agreement 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 long sector 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 had stated that Sahara Corporation was a housing and infrastructure company and was developing/ constructing residential and commercial complexes/ townships under the brand name "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 year 1993 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 it was 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 form of 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 real estate 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, the appellants 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 the relevant 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 the said Act and therefore are liable to pay the service tax.

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 that the 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 and commercial projects would qualify as services as understood in commercial parlance, secondly to the finding that Sahara Corporation had been providing a number of other service 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 the appellants 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 cause notice 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 cause notice, 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 to be 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 be fastened on the basis of such non disclosed ground. 27. In Ballarpur Industries Limited case, the Apex Court held that it is well settled law that the 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 department cannot travel beyond the show cause notice. 29. Undoubtedly, the statements of various persons particularly of Shri R.S . Dubey , Shri O.P . Srivastava and Vandana Bhargava read in proper prospective would reveal that the Sahara Corporation was engaged in the business of development of immovable properties and 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 that purpose the agreement dated 30.03.1995 was entered into. In terms of the agreement, the logo 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 and the 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 not allege 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 in any 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 the purpose of attracting the provision of Section 65(19)(ii) of the said Act, was intended to be

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 to be 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 the Commissioner 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 those services 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 for the 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, the department 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 department contends 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 was never 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 against the 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 tax registration certificate of Sahara Corporation, agreement dated 30.3.2005 and undisputed fact 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 Business Auxiliary Services. 33. Undoubtedly, therefore, there is no dispute about display of logo of Sahara Corporation by 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 relevant period. 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 the department 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 and discharge the burden of proof. 35. The basis for the charge against the appellants and the main piece of evidence against them 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 to give 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

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 as above 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 to make 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 resolution of 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 was arrived 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 arrangements which 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 agreement in that regard. 37. It is the contention of the appellants that the terms regarding brouchers and other arrangements 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 reveal enforcement 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 agreement which 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 in that 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 out which 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 show cause 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 only upon mutual consent. Clause (3) of the agreement is very clear to that effect. Neither there

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 at any 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 Sahara Corporation 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 to display 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 the business 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 some other documents which were seized in the course of investigation. 40. The agreement also discloses payment of substantial amount for display of logo. The logo 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 from time 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 merely disclose 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, even assuming 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 and marketing 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 rendered Business 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 as receipts 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 for others, nor there is any evidence collected in that regard. Merely because the Balance Sheet discloses 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 show cause 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 construction activity 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 in any manner. 43. Another piece of evidence which is relied upon is the registration certificate. Merely on the 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 no presumption 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 service or 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 information revealing 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 those documents 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 Sahara Corporation. In that regard, attention was drawn to the letter dated 18.12.2007 by Shri R.S

. 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 Saroj K. 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 Shri Saroj 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 appellants under 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 Sahara Corporation 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 2002 onwards. 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 Housing Ltd. 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 the material supplied by Sahara Corporation in that regard and for rendering such services and to 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 to have been incorporated under the Companies Act, 1956. The letter dated 13.10.08 by Shri J.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 year 2003-04 upto 2006-07. 50. The other letter dated 17.121.07 was a forwarding letter in respect of copies of debit note. 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 letter dated 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 aware of the applicability of service tax or otherwise to any of the activity under reference carried out 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 investigating officer. 53. As far as the payment documents was concerned, they merely disclose the payments having 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 and Sahara Corporation for display of latters logo on various materials and for that purpose the appellants were to receive certain remuneration from Sahara Corporation and was accordingly 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 the Sahara Corporation had launched various projects of housing and real estate, and therefore,

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 to advertise 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 rates were 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 the agreement 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 the said agreement by Sahara Corporation to the appellants. 58. Shri Saroj K. Dutta in his statement dated 15.5.08 had stated that Sahara Airlines were required 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 by Sahara 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 receive remuneration 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 be targeted for sale of projects by Sahara Corporation. The project comprised of residential and commercial 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 in furtherance 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 some activity 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 ascertain whether the business of development of immovable properties and project building and sale thereof 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 the appellants 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) defines the "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.

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 or marketing 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 the service 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 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 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 that the 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 the department 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. In Black'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 defined therein 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 the taxable 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 the definition of the term "service" as well as the definition of the term "taxable service" under the 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 may not 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 which provides 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 development activities 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 properties and 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 in relation 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. The sale 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 rendered service 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 activities pertaining 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 the category of "Business Auxiliary Services" within the meaning of the said expression under the 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 in support 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 person on 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.

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 is basic 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 sale to 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 for carrying 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/premises inasmuch 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 Act observed 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 defined under 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, 1986 and 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 assistance or 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 provide any "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 its own 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 such constructions, 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 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. 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'."

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 also been 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 the clarification, 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 its own 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 providing taxable 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. Issue No. 1. Is "service tax" applicable on builder, promoter or developer who builds a residential complex with the services of his own staff and employing direct labour or petty labour contractors whose total bill does not increase 4.0 lacs in one financial year ? Legal osition In a case where the builder, promoter or developer builds a residential complex, having more 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 for the construction services provided, to the builder/promoter/ developer under "construction of complex" service falling under Section 65(105)( zzzh ) of the Finance Act, 1994. If no other person is engaged for construction work and the builder/promoter/developer undertakes construction work on his own without engaging the services of any other person, then in such cases in the absence of service provider and service recipient relationship, the question of providing taxable service to any person by any other person does not 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 Taxes has 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 was considering 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 Magas Construction 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 service as such rendered by the assessee to the prospective allottees . 75. Referring to the case of K. Raheja Development Corporation , it has been held by the Gauhati 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, Raheja Development 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

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 the date 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 reconsideration 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 some more decisions of the Apex Court, and they are Tamilnadu Kalyan Mandapam Association vs. 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 the provisions 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, it was 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 for lighting arrangements, furniture and fixtures, floor covering etc , decoration and organizing catering services in the mandap . In fact, the logistic of setting up, selection and maintenance 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 or property. 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 or otherwise. 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 essentially that 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 an apartment 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 such agreement 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 the builder 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 transferred to 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 a consumer and the builder to be a service provider. 80. In Home Solution case, the point for consideration before the Apex Court [this was not a decision 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 including Kalyan 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 property nor 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 be only 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 is contemplated 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 added tax. It is a tax on value addition provided by a service provider. It is, therefore, obvious that

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 is concerned 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 dealing with 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 the Finance 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 Section 65(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 the provision relating to non banking financial companies and financial institutions. Section 45I(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 which carries 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 taking activities of non banking financial companies were also sought to be regulated. Similarly, under RBI guidelines dealing with the accounting for investments, the non banking financial companies 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 the significance 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 are facilities 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 fall within 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 specifically observed that: "a common method of selling goods is by means of an agreement commonly known as a hire-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 the real 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 hirepurchase 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 the Apex 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 is levied 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 a sense 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. The value 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 him based on his performance and skill. This is from the point of view of the professional.

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 goods manufactured 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, the essential 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 Service companies, 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 comes within 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 is not on material or sale. It is on activity/ service rendered by the service provider to its customer. 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 revenue and 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 taxable services on which service tax is made payable." 84. In Bharat Sanchar Nigam 's case the matter related to the state Legislative competency to levy sale tax on the transaction, by which mobile phone connections are enjoyed by the customers, 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 in telecommunication were the electromagnetic waves by which data generated by the subscriber was transmitted to the desired destination and proceeding on the basis that incorporeal 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 they are 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 by the subscribers themselves. In telecommunication what is transmitted is the message by means 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 further observed 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 is nothing 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 is discernible 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

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 them does 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 the activity 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 or on 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, or even 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 would attract the provisions of the said Act. It is, therefore, necessary for the department before classifying 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 service provider 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 necessary to 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 the case 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 immovable properties 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 the sale of such properties or projects. 87. The relevant material to support the allegation regarding rendering of business auxiliary service 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 the Commissioner 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 Sahara Corporation. 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 already observed above, in order to classify an activity as service to others, there has to be service provider 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 to be 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 was promoted 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 Sahara Corporation 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 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. 88. Merely because the debit notes speak of charges being paid for the services according to the 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 promotion and 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 bring the assessee within the net of tax primarily lies upon the department. Failure of the

department to establish the basic ingredient to prove the charge against the assessee can neither 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 be presumed 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 the decision 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 India Pvt. 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 besides the fact that the activities undertaken by them are clearly covered by the definition of the expression 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 96 while 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 dated 10.09.2004 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 construction services (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 service tax." 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 it subsequently, then they do not render any taxable service as such. In other words the sale of 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 para 8.2 it was stated thus:"As regards payment made by the prospective buyers / flat owners, in few cases the entire consideration 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 the construction 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 to the 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 explanation is 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

the service tax would be charged accordingly. This would only expand the scope of the existing 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 the saleable 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 is neither such allegation nor any proof in that regard. 92. The said circular is also relevant in relation to the contention on behalf of the appellants that 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 Auxiliary Service (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 as in 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 even business 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 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". 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 be relating 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 did not 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 net even 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 justified in 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 the Commissionerates 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 Business Auxiliary 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 the activity in the form of promotion of brand unconnected with the promotion of particular

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 the existing 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 having been 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 any change 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-IV reported 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 same would 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 or Industrial 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 been brought 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 dated 27.7.2005. 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 are specifically 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 the activities which had been sought to be subjected to service tax were brought under the net of 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 further observed 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-53CESTAT-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-CESTATAHM) 2008 (11) STR 645 (Tri. Ahmd .) wherein it was held that once a new entry is introduced 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 therein had 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 enumerated under 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 person by 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 trade name, 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 includes symbol, 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 service provided or to be provided to a client by person in relation to Business Auxiliary Service was

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 not disturbed 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 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. 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 under management 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 a particular 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 the assessee were excluded from the scope of consulting engineers service, the judicial pronouncement disclosed that it was not covered under the management consultancy services 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 decision was 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 obviously shows 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 duty retrospectively 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 entry against 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 the records 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 by general 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 earlier entry, 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 be tangible 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 advertisement of 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 said period, 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 the negative. 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 the explanation 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

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 explanation clause, 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 or declaratory 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 on services 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 in the 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 the languages 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 Corporation and 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 evidence in 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 the business 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 displayed the logo of Sahara on the materials agreed upon and that for such activity by the appellants they 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. The activity 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 to the 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 built premises 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 no liability 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 as formulated above accordingly stand answered. 108. In view of conclusions as above, it is not necessary, rather it does not require the Tribunal 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 as stated 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 the matter. 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 to evade 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 duty was 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 deliberately avoid 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 the said respondent dated 30.11.1993 was giving details of how the parts were used in chilling

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 Court observed 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 independent use, 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 possessed in 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 natural meaning 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 having regard 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 customized or 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 statutes particularly 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 by way 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 and lament 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 the Departmental 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 the Tribunal 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 a statute. 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 imposable under 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 the course 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 is imposable 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 tax and yet fails to pay the same. Therefore, penalty can certainly be imposed on erring person under 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 the department 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 provisions regarding 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.

122. In Lubri-Chem Industries vs. Collector of Central Excise, Bombay reported in (2002= 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 on the part of the assessee or conscious or deliberate withholding of information.
TIOL-430-SC-CX)

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 construction which 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 be preferred. 124. In Indo-China Steam Navigation case it was held that where two reasonable constructions 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 say that 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 is applicable, 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 to the issue of penalty. 127. The decision in Padmini Products and Guffic Pharma are in relation to the circumstances 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 demand thereunder is hereby quashed and set aside. The appeal accordingly stands disposed of with consequential relief.
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