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Activity of conducting or managing business for owner cannot be classified under category of ‘Business Support Services’ and profits retained therefrom are not liable to service tax.
Facts
The Assessee entered into a contract with the owner for conducting business of manufacturing and sale of liquor. Under the agreement, a fixed amount was paid to the owner and entire balance profit was retained by assessee. The books of accounts were maintained in the name of owner. Revenue raised demand of service tax under category of ‘Business Support Services’. The Tribunal held that, ‘Business Support Service’ covers only services of supporting nature to main activity and in the instant case, principal activities are done (i.e. activities of manufacturing and sale of liquor) for the owner. It was also noted that owner has paid service tax on fixed charges paid/retained by him under ‘franchisee services’. Aggrieved by the same, the Department preferred an appeal before the High Court.
Held
The Hon. High Court held that findings in the Tribunal’s order are essentially based on clauses of conducting agreement which has been referred to extensively and read together and harmoniously to conclude that the arrangement or deal in the present case is of such a nature that a unit is taken over for conducting and managing by the Assessee. The Assessee is responsible for any profits being generated or losses sustained. The nature of the transaction therefore would not fall within the meaning of support services for business or commerce.
