2011 (1) TMI 69 - AT - Service Tax

Business auxiliary services - respondent is engaged in the mobilising selling recommending mutual fund units of various mutual fund houses and also in selling mobilising recommending investments in bonds issued by banking and non-banking companies - Show Cause Notice was issued to the respondent proposing demand of Service Tax and proposing imposition of penalties - Commissioner dropped the proceedings relying on the decision of the Hon ble High Court of Andhra Pradesh in the case of Karvy Securities Ltd. Vs. Union of India - Commissioner has dropped the proceedings on the ground that the Circular dated 5.11.2003 of the Board which was the basis for issue of Show Cause Notice stands set aside by the Hon ble High Court of Andhra Pradesh no infirmity in the order of the Commissioner - Appeal by the department therefore rejected

Summary

Issues:
Appeal against order of Commissioner regarding service tax on business auxiliary services based on Circular No. 66/15/2003-ST dated 5.11.2003.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi was against the order of the Commissioner regarding the imposition of service tax on business auxiliary services provided by the respondent. The respondent was engaged in activities related to mutual fund units and investments in bonds issued by banking and non-banking companies. The Board's Circular No. 66/15/2003-ST dated 5.11.2003 clarified that these activities fell under business auxiliary services. A Show Cause Notice was issued proposing demand of service tax and penalties. The Commissioner dropped the proceedings based on the decision of the Hon'ble High Court of Andhra Pradesh in a similar case, where the circular dated 5.11.2003 was set aside.

During the hearing, the department argued that the decision of the Hon'ble High Court was under appeal before the Hon'ble Supreme Court. However, they were not aware of any order passed by the Supreme Court setting aside the judgment or granting a stay. On the other hand, the respondent's advocate pointed out that while the appeal had been admitted, no order had been passed by the Supreme Court yet. The advocate also relied on a decision in a similar case involving Commissioner of S.T. Delhi Vs. P.N. Vijay Financial Services Pvt. Ltd., which held a similar view to that of the Commissioner.

The Tribunal found that the Commissioner had correctly dropped the proceedings based on the High Court's decision setting aside the Board's circular. Since the High Court's judgment had not been set aside or stayed by the Supreme Court, the Tribunal did not find any fault in the Commissioner's order. Consequently, the appeal by the department was rejected, and the cross-objection was also disposed of accordingly.