2010 (9) TMI 339 - AT - Service Tax

Waiver of pre-deposit Business Auxiliary Service - appellants are financing the purchasers and charging interest for such finance - Interest charged for finance provided cannot be considered as liable to service tax under the category of business auxiliary service pre-deposit waived

Summary

Issues:
1. Whether the income earned by the applicant under "Finance Account" is liable for service tax under the category of Business Auxiliary Services.
2. Whether the impugned order exceeded the scope of the show cause notice.
3. Whether the interest charged by the appellant for providing finance can be considered as service tax under the category of business auxiliary service.

Analysis:

1. The case involved the question of whether the income earned by the applicant under the "Finance Account" was subject to service tax under the category of Business Auxiliary Services. The audit party alleged that the charges were akin to commission received by the applicant, leading to a demand for service tax and penalty proceedings. The Tribunal considered the submissions and held that the interest charged for providing finance could not be deemed liable for service tax under the category of business auxiliary service. The Tribunal relied on a previous decision where it was established that profits from the sale of goods cannot be equated to commission or discount. Therefore, the demand for service tax was not sustainable in this case.

2. Another issue raised was whether the impugned order went beyond the scope of the show cause notice. The appellant argued that the order should be set aside on this ground alone. The Tribunal acknowledged this argument and found that the impugned order had indeed exceeded the scope of the show cause notice. This further supported the decision to set aside the order and waive the pre-deposit required under Section 35F of the Central Excise Act, 1944.

3. Lastly, the Tribunal considered whether the interest charged by the appellant for providing finance could be considered as liable for service tax under the category of business auxiliary service. The appellant contended that the amount collected was only interest for the finance provided and should not be subject to service tax. The Tribunal agreed with this argument, emphasizing that interest charged for finance provided could not be categorized as service tax under business auxiliary service. Consequently, the Tribunal waived the pre-deposit requirement and granted a stay against the recovery of service tax, interest, and penalty during the appeal process.

Overall, the Tribunal ruled in favor of the appellant, setting aside the impugned order, waiving the pre-deposit requirement, and allowing a stay against the recovery of service tax, interest, and penalty.