2011 (5) TMI 450 - AT - Service Tax

Waiver of pre-deposit - Classification - Business Auxiliary Services - expenses which were incurred were intimately connected with the activity carried out. He appears to have appropriately applied his mind and concluded that all such expenditure or costs contributing to the performance of service shall be treated as consideration for the taxable service provided or to be provided and shall be included in the assessable value for the purpose of charging service tax - Pre-deposit ordered partly.

Summary

Issues:
1. Whether the appellant provided Business Auxiliary Service during the period in question.
2. Whether the appellant's activities fall under the definition of "Business Auxiliary Services" for tax liability.
3. Whether the expenses incurred by the appellant are connected to the taxable service provided.

Analysis:

1. The appellant contested a service tax demand of Rs.39,56,816, arguing that they did not provide Business Auxiliary Service due to changes in laws and exemptions issued by the Board. The appellant claimed to have acted as a commission agent, not involved in promotion or marketing of goods. The appellant requested a chance to clarify their position to avoid liability.

2. The appellate authority examined the case and found a direct link between Business Auxiliary Services and the commission received by the appellant. The authority considered the expenses incurred by the appellant as integral to the services provided. It was concluded that all costs contributing to the service's performance should be treated as consideration for taxable service, thus subject to service tax. As a protective measure for revenue, a pre-deposit of Rs.20 lakhs was ordered, with the balance demand to be stayed pending compliance.

3. The authority's decision was based on a detailed analysis of the appellant's activities, expenses, and the connection to taxable services. The order emphasized the importance of considering all costs related to service provision as part of the assessable value for service tax purposes. The appellant's request for exemption based on being a commission agent was not accepted, highlighting the authority's focus on the nexus between the services provided and the expenses incurred.

This judgment underscores the significance of understanding the scope of taxable services, the relevance of incurred expenses, and the need for compliance with service tax regulations to protect revenue interests.