2011 (1) TMI 642 - AT - Service Tax

Business Auxiliary Service versus Business Support Service - Classification - Electricity Call Centre, Customer Service Centre, Computerized Collection Centre, Energy Audit, Consumer Indexing, Watch & Ward Route Riders etc., - Call Centre Services were exempted vide Notification No. 8/2003-ST as amended and were exempt till 1-3-2006 and liable to Service Tax thereafter - There are several agreements executed by the appellant with different electricity companies of Andhra Pradesh and electricity departments/companies of Orissa - it can be seen that the nature of work performed by the so called electricity call centres, can be said to be registration of complaint on behalf of the electricity board and monitoring of the same till the complaints are resolved - Once the appellants deal with the customer, he is acting on behalf of the electricity company/department and therefore classification of services provided by the appellant is appropriately to be classified under Business Auxiliary Service and not under SSBC Regarding software maintenance - It is the submission of the appellant that maintenance and repair includes development of software and in fact development of software is outside the preview of service tax since the Information Technology service became liable to Service Tax on the development of software only with effect from 16-5-2008 - In the absence of the word development and presence of word maintenance in the agreement, and also in view of the failure of the appellant to submit bifurcation, we have to take a view that the agreement covers maintenance only - suppression of facts could not have been invoked in this case, In view of the above decision, - maintenance of software became taxable only from 1-6-2007. Regarding SSDC - IWhen the meter reading is not done by the implementing agency, as can be seen from the contract with the respective Assistant Accounts Officers or EROs are required to provide meter reading books on the prescribed dates and the appellant is required to enter the data of meter readings, verify the same, incorporate in the computer master and process the bills - Held that this activity is correctly classifiable under SSBC as claimed by the learned Advocate Regarding Energy Audit - In this case, by doing energy audit, the appellant is assisting in finding out whether all the electricity received has been sold and if not, where the problem lies. This is nothing but management of distribution and logistics of electricity supplies - Held that this is clearly covered under SSBC and not under Business Auxiliary Service Regarding time limitation - The certificate of registration was granted much later, but subsequently amendment was issued to say that it was valid from the date of application. After the application was received from the appellant, investigation was taken up and show-cause notice was issued on 5-6-2007 - It is a statutory obligation on the part of every service provider to see whether the service rendered by him is liable to Service Tax and make declaration to the department - It has to be noted that even on 3-3-2006, when the application was made, the appellant had not indicated all activities undertaken by them - Appeal is partly allowed

Issues Involved:
1. Nature and classification of services provided by the appellant.
2. Applicability of Service Tax to the services rendered.
3. Validity of the adjudication order and its alignment with the show-cause notice.
4. Limitation period for issuing the show-cause notice.
5. Imposition of penalties under various sections of the Finance Act, 1994.

Detailed Analysis:

1. Nature and Classification of Services Provided by the Appellant:
The appellant provided services such as operating and maintaining electricity call centers, customer service centers, computerized collection centers, billing, energy auditing, software maintenance, consumer indexing, and watch and ward services. The primary dispute revolved around whether these services should be classified under Business Auxiliary Service (BAS) or Support Services of Business or Commerce (SSBC).

- Electricity Call Centre, Customer Service Centre, and Computerized Collection Centre: The appellant claimed these were call center services exempt until 1-3-2006. The tribunal concluded that these services fell under BAS as they involved registering complaints, monitoring them, collecting payments, and maintaining accounts, which are services provided on behalf of the electricity companies.

- Billing and Accounting Services: The tribunal found these services to be correctly classifiable under SSBC as they involved transaction processing and accounting for the electricity companies, without direct interaction with customers.

- Spot Billing and HT Billing: These services were also classified under SSBC for similar reasons as billing and accounting services.

- Energy Audit: The tribunal held that energy auditing services were more appropriately classified under SSBC as they involved managing distribution and logistics of electricity supplies.

- Software Maintenance: The tribunal determined that maintenance of software became taxable only from 1-6-2007, following the Supreme Court's decision in Martin Lottery Agencies Ltd., which stated that explanations in the Finance Act should not be applied retrospectively.

- Consumer Indexing: The tribunal concluded that this service was correctly classified under SSBC as it involved managing distribution logistics through physical activities and IT services.

- Watch and Ward Services: This service was deemed a subsidiary activity related to customer service and collection centers, thus falling under BAS.

2. Applicability of Service Tax to the Services Rendered:
The tribunal analyzed the applicability of service tax based on the classification of services. It was determined that:

- Services classified under BAS were liable for service tax from their respective dates of applicability.
- Services classified under SSBC were liable for service tax from 1-5-2006.
- Software maintenance services were liable for service tax only from 1-6-2007.

3. Validity of the Adjudication Order and Its Alignment with the Show-Cause Notice:
The tribunal found that the adjudication order did not travel beyond the scope of the show-cause notice. The show-cause notice did not admit that the appellant was rendering call center services exclusively, and the adjudication order appropriately classified the services based on the evidence and agreements provided.

4. Limitation Period for Issuing the Show-Cause Notice:
The tribunal upheld the invocation of the extended period for issuing the show-cause notice, noting that the appellant had not applied for registration until 3-3-2006 and had not indicated all activities undertaken. The appellant's claim of a bona fide belief that they were not liable for service tax was not accepted due to the lack of evidence showing any efforts to seek clarification or legal opinion.

5. Imposition of Penalties:
The tribunal observed that the penalty under section 76 of the Finance Act, 1994, was not quantified in the impugned order, making it defective. The matter was remanded for fresh consideration and determination of the duty liability and penalties.

Conclusion:
The tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for fresh decision, taking into account the tribunal's observations on the classification of services, applicability of service tax, and the need for re-quantification of the demand and penalties.

← Previous Next →