Page 85 - GSTL_30th April 2020_Vol 35_Part 5

2020 ] RAJASTHAN STATE MINES & MINERALS LTD. v. COMMR. OF C. EX. & S.T., JAIPUR 571
separate contract with the joint venture/partnership for providing a specif-
ic service in lieu of a separate specific consideration. Such consideration for
specific services provided under an independent contract between a co-
venture/partner and joint venture/partnership can be taxable, as such con-
tracts are executed by the partners not in their capacity of the partners but
as independent contractors and such a relationship is governed by a sepa-
rate contract independent of the partnership/joint venture agreement. To il-
lustrate, a partner in a partnership firm may enter into a separate lease
agreement with the firm for renting out his private property to the partner-
ship firm for a monthly rent in this situation, the partner will be liable to
pay service tax on the renting service rendered by him to the firm. On the
other hand, if the partner chooses to grant the firm a right to use his office
premises and regards this as his contribution to the hotch-potch of the part-
nership firm, the reward by way of profits which such partner may earn
upon the success of the partnership venture will not be taxable as the profit
earned by the partner in such circumstances is not a consideration for the
service of renting out the property to the partnership firm. By placing the
office at the disposal of the firm to conduct his business the partner agrees
to receive only a share of profit which is contingent upon the firm earning
profits in the first place. If the venture fails and the firm does not earn any
profit, the partner may not receive anything in return for the contribution
made by him. On the other hand, if the firm’s venture is successful, the
partner may earn profit which may be much more than the normal rent that
he would have earned by simply leasing out the office to the firm for a fixed
rent. The profits which the partner will earn in such circumstances is a re-
ward due to an entrepreneur for the risk that he takes and cannot be re-
garded as a consideration for the renting of the office to the firm.
……. …….
23. We are accordingly of the view that there is no service that has been
rendered by the appellant. Much less the taxable service of renting of im-
movable property. The money flow to the assessee from SWPL, under the
nomenclature of Royalty, is not a consideration for rendition of any services
but in fact represents the appellant’s share of revenue arising out of the
Joint Venture being carried on by the assessee and SWPL.
24. Since we are allowing the party’s appeal on merits the other conten-
tion to the aspect to time-bar are not being gone into. The Revenue’s appeal
challenging the non-imposition of penalty does not survive as the demand
of service tax itself is not sustainable. Consequently, the party’s appeal is al-
lowed and the Revenue’s appeal is dismissed.”
20. Appeal against this order was dismissed by the Supreme Court.
21. In the circumstances, we find that there is no element of service in-
volved in the transaction, undertaken by the appellant while acquiring the land
and transferring the same to the JV company, for setting up of the power plant.
22. Regarding the second issue about the treatment of 51% of equity
held by the appellant in the JV company towards consideration for rendering
‘Business Auxiliary Service (BAS)’, we find that the Commissioner has not given
any category under this it is to be treated as service. We find that the activity of
grant of 51% share in JV is not covered in any of the sub-heading under the
‘Business Auxiliary Service’, as defined in Section 65(105) of the Finance Act. It is
also not clear from the impugned order or from the submission made by the
Learned Authorised Representative as to whether this grant of equity to the
GST LAW TIMES  30th April 2020  85