2007 (3) TMI 79 - AT - Service Tax

Business Auxiliary Service - Alleged that appellant were liable to pay service tax on taxable service of procurement of goods for their clients covered by Business auxiliary service - Held that service tax demand not sustainable

Summary

Issues:
1. Stay application against Order-in-Appeal for demand of tax on margin obtained in procuring goods for turnkey projects.
2. Classification of activity as taxable service under Business Auxiliary Services.
3. Interpretation of works contract in relation to provision of business auxiliary services.

Analysis:
1. The case involved an application for stay against an Order-in-Appeal demanding tax on the margin received by the appellants for procuring goods used in their turnkey projects. The appellants argued that the activity was part of turnkey contracts and did not constitute provision of business auxiliary services to their clients. They contended that the transaction was based on works contract, citing a previous Tribunal decision that there would be no service in works contracts. The Tribunal noted the argument and held that the demand did not appear sustainable based on the precedent set by the Tribunal in a similar case.

2. The appellants, registered as providers of various services including Business Auxiliary Services, had collected amounts for transporting materials to project sites. The lower authorities classified the activity of providing materials at project sites as a taxable service of 'procurement of goods' under Business Auxiliary Services. However, the appellants argued that the materials were components of the projects and the activity should be considered part of turnkey contracts rather than a separate taxable service. The Tribunal, considering the arguments and legal precedents, found the demand for tax not prima facie sustainable and granted a complete waiver of pre-deposit with a stay on recovery until the appeal's disposal.

3. The ld. SDR reiterated the arguments made by the Commissioner in passing the impugned order, but the Tribunal, after examining the records and submissions, found in favor of the appellants based on the interpretation of works contract and the precedent set in a relevant case. The Tribunal's decision to grant a waiver of pre-deposit and stay of recovery was based on the lack of sustainability of the tax demand on the margin obtained by the appellants in procuring goods for their projects. The judgment highlighted the importance of legal interpretations and precedents in determining the tax liability in cases involving complex service transactions and works contracts.