2009 (1) TMI 735 - AT - Service Tax

Summary

Issues involved: Interpretation of 'Business Auxiliary Service' (BAS) u/s 78 of the Finance Act, 1994; Imposition of penalty u/s 76 of the Act; Waiver of pre-deposit and stay of recovery.

Interpretation of 'Business Auxiliary Service' (BAS) u/s 78 of the Finance Act, 1994:

The appellants, M/s. Pearl Packaging, were involved in blending and packing tea for M/s. Indco Serve under an agreement. The original authority demanded service tax and penalties u/s 78 and 11 of the Act. The Commissioner (Appeals) upheld the demand but reduced the penalty u/s 78. However, the Commissioner of Central Excise imposed a penalty u/s 76 after review proceedings. The appellants argued that the activity was not done 'on behalf of' Indco Serve as required by the amended definition of BAS. The CBEC clarified that the activity was taxable only if done 'for and on behalf of' another person, which was not the case here. The Tribunal found the penalty imposed by the Order-in-Revision to be unsustainable in law as the service was not liable to service tax during the relevant period. Consequently, the Tribunal ordered waiver of pre-deposit and stay of recovery of the penalties pending decision in the appeals.

Imposition of penalty u/s 76 of the Act:

The Commissioner of Central Excise imposed a penalty u/s 76 after review proceedings, alleging non-discharge of service tax liability by the appellants for the activity of blending and packaging tea. However, the Tribunal found that the penalty was not warranted as the activity did not fall under the expanded definition of BAS requiring it to be done 'for and on behalf of' another person. The Tribunal held that the service was not liable to service tax during the relevant period, leading to the decision to waive pre-deposit and stay recovery of the penalties imposed on the appellants.

Waiver of pre-deposit and stay of recovery:

After considering the arguments and the clarification provided by the CBEC regarding the scope of BAS, the Tribunal concluded that the service provided by the appellants was not taxable during the material period. Therefore, the Tribunal ordered waiver of pre-deposit and stay of recovery of the penalties imposed on the appellants pending the final decision in the appeals.