By TIOL News Service

MUMBAI, OCT 16, 2017: THE appellantsM/s SSL are in the business of operating and running retail stores under the brand of 'Shoppers Stop' where goods of various brands, varieties, descriptions, etc. are sold. They grant concessions to various concessionaires who are the brand name owners of the goods so sold in the appellant's stores. Those concessionaires are authorised by the appellant to display, demonstrate and sell the products from the said retail stores operated by M/s SSL. The consideration for the concession is received by the appellant as a percentage of the goods sold subject to a minimum guaranteed amount. For the said arrangement of concession, the appellant entered into a 'Concession Agreement' with the concessionaires.

The case of the revenue is that the consideration received is classifiable under the category of 'Business Support Service' and service tax is payable on the same.

SCN dated 22.10.2009 was issued to the appellant for the period 01.05.2006 to 31.05.2007 demanding service tax of Rs.3,44,45,034/-.

The adjudicating authority confirmed the demand and imposed penalties along with interest.

The appellant has challenged the order before the CESTAT and argued that the transaction entered between the appellant and the concessionaire is the purchase and sale of the goods and not of any provision of service;that the appellant has also paid VAT on the entire amount of sale price realized from the ultimate customer.

It is further submitted that from 1/6/07 they paid service tax on the same activity under the category of 'Renting of Immovable Property' and which has been accepted by the department and, therefore, for the same service, for the past period Revenue cannot classify the said service under a different category of "Business Support Service".

The AR submitted that as per the concession agreement, the appellant granted right to display and sell the concessionaire's product from the store of the appellant for which the appellant provides huge infrastructure support for commerce of the concessionaire and, therefore, the service is clearly of 'Business Support Service' and not of 'renting of immovable property'. Furthermore, the consideration of such service is either by way of a minimum guarantee amount or as a percentage of the value of the goods sold and this clearly indicated that there is no renting of any space. Moreover, merely because the appellant paid service tax w.e.f. 01/06/2007 under the category of 'Renting of immovable property, it cannot be held that the classification of the service is settled. Inasmuch as there was no occasion except in the present case to decide the legality of the classification in question and hence the impugned order needs to be upheld.

The Benchreproduced the relevant clauses of the agreement between the appellant and one of the concessionaires i.e. M/s. Luxor Writing Instrument Pvt. Ltd. and observed -

+ From reading of the various clauses of the agreement and it's terms & conditions, it is observed that the appellant is maintaining complete business infrastructure under the brand name of 'Shoppers Stop' wherein the concessionaire was given right to display, promote and sale of their product.

+ The concessionaire is only displaying and selling their product but the entire store, ambience, electricity, security, air conditioning etc. are provided by the appellant.

+ The customer comes to the store not only by recognizing the product/brand sold in the store but mainly by recognizing the goodwill of the brand of the appellant i.e. 'Shoppers Stop' for which the concessionaire agrees to pay a consideration either in the form of percentage of sale or minimum guaranteed amount.

+ It is also fact that the appellant does not make payment of so called sale of the goods by the concessionaire to the appellant immediately at the time of sale of the goods to the customer. The amount is retained for more than a month and thereafter the amount, after deduction of the appellant's consideration, is paid to the concessionaire.

+ The appellant have practically no role in the sale of the goods except making documents such as invoices. The concessionaire only display and sell the goods. Therefore the appellant's receipt of consideration is only towards the facilities provided by the appellant to the concessionaire i.e. infrastructure, schemes, air-conditioned store, electricity, common security and most important is Shoppers Stop branded store.

+ Therefore these activities/facilities provided by the appellant indeed provision of service. The appellant's contention is that the consideration is of trading margin only but in our view the service charges for the facilities provided by the appellant given a colour of trading margin. When the activity is in the nature of service, though the manner of consideration is in different form, it will be treated as indirect consideration towards the said service.

Whether service is classifiable under "BSS":

After reproducing the definition of "BSS", the Bench observed –

"…As per the plain reading of the definition, it can be seen that any service provided in relation to business or commerce is a 'support service of business or commerce'. In the present case the concessionaire is solely engaged in the commerce i.e. sale of their goods in the premises of the appellant. The appellant provides their branded store duly air-conditioned, with adequate ambience, lighting, common security, various sales schemes to attract the customer. These facilities contribute in the sale of the goods of the concessionaire from the stores of the appellant. Therefore the service of the appellant clearly covered in the first clause of the definition of 'support services of business or commerce'. The scope of this service is not limited but very wide. In our view any service which support the operation of business and commerce of the client covers under the business support services, if it is not specified under the specific classification.

… from the concession agreement, it can be seen that the consideration is either in the form of percentage of sale or if the total amount, as per the percentage does not meet to the minimum guaranteed amount then irrespective of percentage the fixed minimum guaranteed amount is charged by the appellant from the concessionaire. This further establish that the arrangement is not of sale-purchase of goods between concessionaire and the appellant but of service."

Classification adopted by appellant from 01.06.2007 under "RIPS".

"… In this regard, we find that appellant suo moto classified the service under 'Renting of immovable property service' and started paying service tax, since there is no revenue impact, no dispute arose from either side. In the present case the question of classification was raised by the Revenue by issuing show cause notice, question has to be answered as per the prevailing statutory provisions, therefore , merely because the appellant from 1-6-2007 classified the service under "Renting of immovable property service" and department has not raised any objection, cannot become a law to construe that service involved in the present case is of "Renting of immovable property service"."

Limitation, Penalty:

"…we find that before 1-6-2007, appellant neither declared their service nor filed any ST-3 returns declaring the service of Business Support Service, therefore, department was completely kept in dark about the provision of service under the category of Business Support Service, therefore there is clear suppression of facts on the part of the appellant, extended period was correctly invoked. For the same reason penalties imposed are also legal and correct, which do not require any interference…"

Concluding that the appellant had provided 'Business Support Service' which is taxable during the relevant period 01.05.2006 to 31.05.2007, the impugned order was upheld and the appeal was dismissed.

(See 2017-TIOL-3713-CESTAT-MUM)