2011 (8) TMI 788 - AT - Service Tax

Demand - Business Auxiliary Service - When the facts recorded in the appellate order is that a different sister unit, i.e., IT Energy was preparing and issuing regular computer bills to customers and were paying taxes and that was dealt separately under law, that throws light that Revenue recognised different entity status of this appellant and independently dealt the same under law - Mere appearance of the figures in the consolidated balance sheet of Sai Computer Pvt. Ltd. does not bring the appellant to the tax liability when from the beginning, Revenue authorities relied upon the agreement dated 13.03.01 as RUD-I and treated the Appellant as a different taxable entry granting a separate registration to it - In the absence of such a charge and authorities not having proceeded with that concept the appellant succeeds holding that mere appearance of the figures of the appellant in the consolidated Balance Sheet of Sai Computer Pvt. Ltd. ipso facto does not bring the appellant to the fold law when the appellant was recognized by Authorities as a distinct entity - Appeal is allowed

Summary

Issues:
1. Taxability of services provided by the appellant under the Business Auxiliary Service category.
2. Interpretation of the agreement between the appellant and UP Power Corporation Ltd.
3. Liability of the appellant for service tax under the Finance Act, 1994.
4. Recognition of the appellant as a separate entity for tax purposes.

Analysis:
1. The appeal challenged the first Appellate Order confirming a service tax demand for providing business auxiliary services. The Ld. Appellate Authority concluded that the appellant's activities fell under the Business Auxiliary Service category based on the agreement with UP Power Corporation Ltd. The appellant argued that it only served the Corporation and not its clients, thus not liable for service tax under the relevant law.

2. The agreement between the appellant and UP Power Corporation Ltd. was crucial in determining the nature of services provided. The appellant contended that its obligations were solely towards the Corporation, as evidenced by the scope of work in the agreement. The appellant's services were specifically tailored for the Corporation, indicating a direct relationship without serving the Corporation's clients.

3. The liability for service tax under the Finance Act, 1994 hinged on whether the appellant's activities constituted Business Auxiliary Service. The appellant's defense centered on its distinct entity status, separate from its sister concerns, and the specific contractual obligations towards the Corporation. The Revenue argued that the appellant's services to the Corporation made it liable for service tax under the relevant clauses of the Act.

4. The recognition of the appellant as a separate taxable entity played a crucial role in determining tax liability. The Tribunal found that the appellant was treated as a distinct entity by Revenue Authorities, evidenced by separate registrations and independent dealings with sister concerns. The absence of evidence showing the appellant serving the clients of the Corporation further supported the appellant's position as a separate entity not liable for service tax.

5. The Tribunal ultimately set aside the first Appellate Order, ruling in favor of the appellant based on the distinct entity status and the specific nature of services provided to UP Power Corporation Ltd. The judgment highlighted the importance of contractual obligations and the lack of evidence supporting the appellant serving the Corporation's clients, leading to the dismissal of the service tax demand.