2011 (6) TMI 365 - AT - Service Tax

Business Auxiliary Services - demand confirmed invoking extented period - Held that - Appellant could have had a bonafide belief that the services rendered by him would not fall under any of the services of BAS as they were not providing any other services to their clients. Their bonafide belief cannot be doubted, as during the relevant period, as the services falling under the Notification No.25/2004-ST dated 10.9.2004, which was later on interpreted in CCE Vs. Car World Autoline -(2009 (6) TMI 423 - KERALA HIGH COURT) in a manner other than the thought as was entertained by the appellant. Thus show cause notice which invoked the extended period of limitation for demand of duty would be incorrect. The demand of Service Tax in this case would be within the limitation as provided in the law. Also strong force in the contention raised by assessee that the amount collected by them should be considered as cum-duty amount. As regards the imposition of penalty having held there could be a bonafide belief, the provisions of Section 80 can be invoked & set aside the penalties imposed on the appellant under Section 78. Thus upholding appellant s liablity to pay Service Tax under the category of Business Auxiliary Services within the period of limitation from the date of issuance of show cause notice.

Summary

Issues:
1. Applicability of Service Tax on services provided to a bank as a direct selling agent.
2. Interpretation of Notification No.25/2004 for exemption.
3. Invocation of extended period of limitation for demand of Service Tax.
4. Consideration of amount received as cum-duty amount.
5. Imposition of penalties under Section 78 of the Finance Act, 1994.

Analysis:
1. The appellant provided services to a bank as a direct selling agent, referring individuals seeking financial loans to the bank and receiving a commission upon loan sanction. The issue revolved around categorizing these services under 'Business Auxiliary Services' for Service Tax assessment.

2. The appellant argued for exemption under Notification No.25/2004, claiming the services fell under "other financial services." However, the Tribunal found that the services did not qualify for exemption as per the notification's clauses, citing a High Court ruling that similar services did not fall under the exemption.

3. The Tribunal addressed the invocation of the extended period of limitation for demanding Service Tax. It acknowledged the appellant's bonafide belief that their services did not fall under 'Business Auxiliary Services' during the relevant period. Consequently, the Tribunal deemed the extended period notice for demanding tax as incorrect, limiting the demand within the statutory limitation period.

4. Regarding the consideration of the amount received as cum-duty amount, the Tribunal directed the lower authorities to recalculate the Service Tax liability by treating the entire amount received by the appellant as cum-duty amount, emphasizing the need for re-quantification based on this consideration.

5. Lastly, the Tribunal considered the imposition of penalties under Section 78 of the Finance Act, 1994. Given the appellant's bonafide belief and the discretion provided by Section 80 of the Act, the Tribunal set aside the penalties imposed under Section 78, opting to invoke Section 80 instead. The matter was remanded to the Adjudicating Authority for re-quantification of the Service Tax amount and the imposition of interest, with the appeal disposed of accordingly.