Page 167 - GSTL_2nd July 2020 _Vol 38_Part 1

2020 ] NIRAJ PRASAD v. COMMISSIONER OF C. EX. & S.T., KANPUR 85
appellant were two different business entities working under a service agree-
ment and the responsibility of the appellant was appropriately covered under
the “business auxiliary service”.
15. A perusal of the agreement between Career Launcher and the ap-
pellant reveals that the appellant was entitled to 75% of the net revenue amount
deposited by it in the bank account of Career Launcher towards the fees collected
from the students, while Career Launcher was entitled to the remaining 25%.
This arrangement is a typical revenue sharing model arrangement. The appellant
was not to receive fixed amount per annum or per month from Career Launcher
but only a certain percentage of the net revenue. In such a situation, it cannot be
said that the appellant was a service provider and Career Launcher was a service
recipient. No service was, therefore, provided by the appellant to Career
Launcher. This view finds support from the decision of the Tribunal in Mormugao
Port Trust. The Tribunal found that unless it can be established that a specified
amount had been agreed upon to be paid as a quid pro quo for undertaking any
particular activity, it cannot be assumed that there was a consideration agreed
upon for a specific activity so as to constitute a service. The Tribunal relied upon
its earlier decision rendered in Cricket Club of India v. Commissioner of Service Tax
[2015 (40) S.T.R. 973] and the relevant portion of the order is reproduced below :-
“17. The question that arises for consideration is whether the activity un-
dertaken by a co-venturer (partner) for the furtherance of the joint venture (part-
nership) can be said to be a service rendered by such co-venturer (partner) to the
Joint Venture (Partnership). In our view, the answer to this question has to be in
the negative inasmuch as whatever the partner does for the furtherance of the busi-
ness of the partnership, he does so only for advancing his own interest as he has a
stake in the success of the venture. There is neither an intention to render a service
to the other partners nor is there any consideration fixed as a quid pro quo for any
particular service of a partner. All the resources and contribution of a partner enter
into a common pool of resource required for running the joint enterprise and if such
an enterprise is successful the partners become entitled to profits as a reward for the
risks taken by them for investing their resources in the venture. A contractor-
contractee or the principal-client relationship which is an essential element
of any taxable service is absent in the relationship amongst the partners/co-
venturers or between the co-venturers and joint venture. In such an ar-
rangement of joint venture/partnership, the element of consideration i.e.
the quid pro quo for services, which is a necessary ingredient of any taxable
service is absent.
18. In our view, in order to render a transaction liable for Service Tax, the
nexus between the consideration agreed and the service activity to be undertaken
should be direct and clear. Unless it can be established that a specific amount has
been agreed upon as a quid pro quo for undertaking any particular activity by a
partner, it cannot be assumed that there was a consideration agreed upon for any
specific activity so as to constitute a service. In Cricket Club of India v. Commis-
sioner of Service Tax, reported in 2005 (40) S.T.R. 973 it was held that mere
money flow from one person to another cannot be considered as a consid-
eration for a service. The relevant observations of the Tribunal in this re-
gard are extracted below :
’11. ….. Consideration is, undoubtedly, an essential ingredient
of all economic transactions and it is certainly consideration that forms
the basis for computation of Service Tax. However, existence of consid-

GST LAW TIMES  2nd July 2020  167