2011 (8) TMI 190 - AT - Service Tax

Services provided to bank - Loan verification service - Services rendered by the Chartered Accountant - Business Auxiliary Services or not - There is no dispute about the type of service being provided by the appellant - appellant had only provided the services of contact point verification of residence and offices - As such, it is clear that it is only the contact point that is the addresses given by the client of the bank which are required to be verified - No further service is being provided by the appellant - The verification of the addresses given by the clients cannot be held to be a service equivalent to promoting or marketing the services of the bank or evaluating their prospective customers - As such, we are of the view that the services being provided by the appellant cannot be held to be covered under the category of Business Auxiliary Services - Decided in favour of assessee.

Summary

Issues:
1. Whether the services provided by the appellant to M/s HDFC fall under the category of Business Auxiliary Services for the purpose of Service Tax liability.
2. Whether the penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994 are justified.

Issue 1:
The appellant, a Chartered Accountant, provided services to M/s HDFC for contact point verification of residence and offices of the bank's clients. The Revenue contended that these services fell under Business Auxiliary Services, imposing Service Tax, interest, and penalties. The appellant argued that the services provided were limited to contact point verification and did not involve promoting or marketing the bank's services. The Tribunal examined the agreement and found that the appellant indeed provided only contact point verification services, without engaging in activities related to promoting or marketing the bank's services. Consequently, the Tribunal held that the services did not fall under the category of Business Auxiliary Services. The impugned order was set aside, and the appeal was allowed in favor of the appellant.

Issue 2:
The lower authorities had imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. However, since the Tribunal ruled in favor of the appellant regarding the classification of services, the penalties imposed were no longer justified. As a result, the Tribunal allowed the appeal with consequential relief to the appellant, setting aside the penalties along with the Service Tax liability.

This judgment by the Appellate Tribunal CESTAT, New Delhi, analyzed the nature of services provided by the appellant and concluded that they did not fall under the category of Business Auxiliary Services for Service Tax purposes. The Tribunal's decision was based on a thorough examination of the agreement between the appellant and M/s HDFC, which clearly outlined the scope of services limited to contact point verification. The ruling highlights the importance of accurately defining the nature of services provided in determining tax liabilities and penalties under the relevant provisions of the Finance Act, 1994.