2011 (11) TMI 408 - AT - Service Tax

Demand - Business auxiliary service - Time limitation - the appellants started paying service tax on commission received by them from banks and NBFCs - The department made out a case that their activity amounted to Business Auxiliary Service even for the period prior to 10-9-2004 and issued a Show Cause Notice dated 20-4-2006 demanding such tax - Held that the entries for Business Auxiliary Service and Business Support Service have different objects. After the introduction of the new entry, there can be argument as to which entry covers the activity more appropriately - The Higher Courts have been taking the view that in such situations the extended period of time cannot be invoked for raising demand

Summary

Issues Involved:
1. Classification of services provided by the Appellants under "Business Auxiliary Service."
2. Applicability of service tax on commission received prior to 10-9-2004.
3. Validity of extended period for raising demand.
4. Examination of exemption claim under Notification 8/2003-S.T.
5. Legality of penalties imposed under Sections 76, 77, and 78 of Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Classification of Services:
The primary issue was whether the activities carried out by the Appellants, such as facilitating car loans for banks and NBFCs, fell under the category of "Business Auxiliary Service" as defined in the Finance Act, 1994. The Tribunal examined the scope of services provided, which included promotion and marketing of loan products, customer verification, and collection of post-dated cheques. The definition of "Business Auxiliary Service" before and after 10-9-2004 was analyzed, and it was concluded that the activities were indeed covered under this category, both before and after the amendment.

2. Applicability of Service Tax Prior to 10-9-2004:
The Tribunal noted that the Appellants started paying service tax from 10-9-2004 but did not pay any tax on commissions received before this date. The department issued a Show Cause Notice on 20-4-2006, demanding tax for the period prior to 10-9-2004. The Tribunal referred to previous decisions, such as Bridgestone Financial Services v. CST, which clarified that the services were taxable under "Business Auxiliary Service" even before 10-9-2004.

3. Validity of Extended Period for Raising Demand:
The Tribunal considered whether the extended period for raising the demand was justified. The Appellants argued that they were registered and paying service tax from 10-9-2004, and all facts were known to the department. The Tribunal acknowledged that there was considerable doubt about the coverage of the entry for "Business Auxiliary Services" and noted contrary decisions of the Tribunal on this matter. It concluded that the extended period could not be invoked due to the lack of mala fide or suppression, and the demand beyond the normal period of one year was not sustainable.

4. Examination of Exemption Claim Under Notification 8/2003-S.T.:
The Appellants claimed exemption under Notification 8/2003-S.T., dated 20-6-2003, which the lower authorities had not examined. The Tribunal did not specifically address this issue in detail but implied that any demand within the normal period should consider applicable exemptions.

5. Legality of Penalties Imposed:
The Tribunal evaluated the imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. It was determined that due to the confusion and interpretation issues surrounding the entry for "Business Auxiliary Services," there was no fraud, suppression, or misdeclaration by the Appellants. Consequently, the penalties were deemed unwarranted, and the benefit of Section 80 was granted to waive the penalties.

Conclusion:
The Tribunal partially allowed the appeal, holding that the service was classifiable under "Business Auxiliary Service" during the relevant period. However, the demand raised beyond the normal period of one year was not sustainable. The Appellants were liable for any demand within the normal period, along with interest, but no penalties were imposable. The judgment provided consequential relief to the Appellants as applicable.