2015 (5) TMI 1016 - AT - Service Tax

Demand of Service tax - Reverse charge mechanism on import of Business Auxiliary Service - Held that - as per the agreement between appellant and M/s Wainwright Industries Inc., sorting is defined as inspection for good/bad determination of part status. Thus, it is obviously a process by which it was determined whether a part was good or bad and in case of a bad part it was required to be reworked. The other components of the service including rework also clearly fall within the scope of Business Auxiliary Service as defined under Section 65(19) of the Finance Act, 1994. Thus, it is a case of import of Business Auxiliary Service and the appellant is required to pay service tax under reverse charge mechanism. Best Judgment assessment - Section 72 of Finance Act, 1994 - Best judgement assessment done by adopting 100% increase year on year without any basis - Held that - it is seen that the year on year growth from 2006-07 to 2007-08 was in the range of about 60% and that could be some reasonable basis for the purpose of best judgement assessment. However, not providing details in spite of repeated letters prima facie is an indication of suppression of facts. - Decided against appellant

Summary

Issues:
1. Confirmation of service tax demand under reverse charge mechanism on import of Business Auxiliary Service.
2. Appellant's contentions regarding export of goods, sorting not amounting to processing, best judgement assessment, and suppression of facts.
3. Revenue's arguments on appellant's lack of response, resorting to best judgement assessment, and nature of services provided by Wainwright Industries.
4. Tribunal's analysis on appellant's behavior in quasi-judicial proceedings, definition of sorting as a process, applicability of Business Auxiliary Service, basis for best judgement assessment, and pre-deposit requirement.

Confirmation of Service Tax Demand:
The Tribunal confirmed a service tax demand of Rs. 3,90,11,312 under reverse charge mechanism on import of Business Auxiliary Service. The appellant exported auto parts and engaged Wainwright Industries for services abroad. The Tribunal found the services provided fell within the scope of Business Auxiliary Service, requiring service tax payment under reverse charge.

Appellant's Contentions:
The appellant argued that sorting did not amount to processing and that the best judgement assessment lacked a reasonable basis. They claimed no suppression of facts beyond a year. However, the Tribunal noted the appellant's lack of response to multiple letters and show cause notices, indicating irresponsible behavior in quasi-judicial proceedings.

Revenue's Arguments:
The Revenue highlighted the appellant's failure to respond to letters seeking details, justifying resorting to best judgement assessment. They emphasized that Wainwright Industries provided services related to production or processing of goods, falling under Business Auxiliary Service. The appellant's lack of cooperation was seen as evidence of suppression of facts.

Tribunal's Analysis:
The Tribunal observed the appellant's non-compliance with requests for information and show cause notices. They determined that sorting, as per the agreement, involved a process of determining part status, constituting a form of processing. The Tribunal found the appellant's behavior irresponsible and upheld the best judgement assessment due to the lack of cooperation and suppression of facts.

The Tribunal ordered a pre-deposit of Rs. 2.35 crores with interest to meet statutory requirements. Compliance was mandated within six weeks, failing which the appeal would be dismissed. Recovery of the remaining liability was stayed pending appeal, contingent on the pre-deposit compliance by the specified date.