2010 (10) TMI 326 - AT - Service Tax

Classification of services - Vehicle Transportation Contract - transportation and safe delivery of the chassis/vehicles - Whether services rendered by the appellants would fall under the category of business auxiliary services - Adjudicating authority confirmed the demand raised in the show-cause notice imposed penalties and also demanded interest on the service tax payable by the assessee - The Hon ble High Court of Punjab and Haryana in the case of Dr. Lal Path Lab (P.) Ltd. (2007 -TMI - 2104 - HIGH COURT OF PUNJAB & HARYANA) held that there was no doubt that merely because any incidental service was rendered by the assessee like putting across or dropping of the name of the principal company it would not become part of the definition of business auxiliary service within the meaning of section 65(19)(ii) - The Hon ble High Court upheld the order of the Tribunal holding that prior to that date the activities rendered by the assessee would not be covered under the category of business auxiliary services when specific entry was introduced - Held that the activities rendered by the appellant would be covered only under the category of business support services and that also with effect from 1-5-2006 when specific entry was brought into taxable services under section 65(104c) of the Finance Act 1994 and prior to 1-5-2006 the services rendered by the appellant would not fall under the category of business auxiliary services -The impugned order is not sustainable and liable to be set aside - The appeal is allowed with consequential relief.

Issues Involved:
1. Classification of services rendered by the appellant.
2. Applicability of 'Business Auxiliary Services' versus 'Business Support Services'.
3. Tax liability for the period prior to 1-5-2006.
4. Interpretation of contractual obligations under the 'Vehicle Transportation Contract'.

Issue-wise Detailed Analysis:

1. Classification of Services Rendered by the Appellant:
The primary issue was whether the services rendered by the appellant to Tata Motors fell under 'Business Auxiliary Services' or 'Business Support Services'. The appellant contended that their services should be classified under 'Business Support Services', which became taxable from 1-5-2006. The Revenue argued that the services fit under 'Business Auxiliary Services' for the entire period under consideration.

2. Applicability of 'Business Auxiliary Services' versus 'Business Support Services':
The definition of 'Business Auxiliary Services' includes services related to the promotion or marketing of goods. The adjudicating authority held that the appellant's services, which involved transporting vehicles from Tata Motors' factories to regional sales offices, indirectly promoted the sale of goods and thus fell under 'Business Auxiliary Services'. However, the Tribunal found that the appellant's role was limited to transportation and did not involve any marketing or sales activities. The Tribunal concluded that the services were more appropriately classified under 'Business Support Services', specifically under 'managing distribution and logistics', which became taxable from 1-5-2006.

3. Tax Liability for the Period Prior to 1-5-2006:
The Tribunal noted that 'Business Support Services' were brought into the service tax net only from 1-5-2006. The Tribunal cited previous judgments, including those in the cases of Oil India Ltd. and Assam Gas Co. Ltd., which established that services not specifically taxable before a certain date could not be retrospectively taxed. The Tribunal concluded that the services rendered by the appellant prior to 1-5-2006 could not be taxed under 'Business Auxiliary Services'.

4. Interpretation of Contractual Obligations Under the 'Vehicle Transportation Contract':
The Tribunal examined the 'Vehicle Transportation Contract' between the appellant and Tata Motors. The contract required the appellant to transport vehicles from the factories to regional sales offices, maintain records, and ensure timely delivery. The adjudicating authority had interpreted these obligations as auxiliary to the sale of goods. However, the Tribunal found that the contractual obligations were purely logistical and did not involve any promotional or marketing activities. The Tribunal emphasized that the nature of the services rendered, as described in the contract, aligned more with 'Business Support Services' rather than 'Business Auxiliary Services'.

Conclusion:
The Tribunal concluded that the services rendered by the appellant were correctly classifiable under 'Business Support Services' and not 'Business Auxiliary Services'. As 'Business Support Services' became taxable only from 1-5-2006, the Tribunal held that the appellant was not liable for service tax for the period prior to this date. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.

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