Case Law Details
Naveen Chava Vs Commissioner of Central Tax (CESTAT Bangalore)
Introduction: In a recent ruling by the Hon’ble CESTAT, Bangalore, in the case of Naveen Chava Vs Commissioner of Central Tax, the classification of business transfer agreements (BTA) with a non-compete clause as Declared Service for demanding Service Tax was deliberated. This article delves into the facts, issues, and the key findings of the case.
The Hon’ble CESTAT, Bangalore, in the case of Naveen Chava v. Commissioner of Central Tax [Service Tax Appeal No. 20013 of 2021 dated January 30, 2024], held that in the current case, no evidence establishes that a substantial portion of the agreement refers to the obligations that are to be followed by the Appellants. Further, if any payment has been made for an independent activity of tolerating an act under an independent arrangement, such payments will not constitute ‘consideration.’ Therefore, business transfer agreements (“BTA”) entered by the Appellants having a non-compete clause cannot be classified as Declared Service under Section 66E (e) of the Finance Act, 1994 (“the Finance Act”) for demanding Service Tax.
Facts:
Naveen Chava and Others (“the Appellants”) were engaged in designing integrated sheets/circuits for the telecom industries. They entered into a BTA of a going concern as a whole with M/s. Altran Technologies India Pvt. Ltd. (“M/s. Altran”) on July 27, 2020. They agreed to sell, transfer, grant, assign, and deliver to M/s. Altran all their rights, title, and interests with respect to the business as a going concern, free and clear from all encumbrances on a slump sale basis as defined in Section 2(42C) of the Income Tax Act, 1961 (“the IT Act”).
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