2011 (11) TMI 409 - AT - Service Tax

Demand - Time limitation - Notification 25/2004 and Notification 14/2004-S.T - Whether service tax is to be paid on such commission categorizing the activity of the Appellants as business auxiliary service - The adjudicating authority examined the matter and issued an order confirming the tax demanded along with interest and also imposing penalties under Sections 76, 77 and 78 of Finance Act 1994 - case the Banks/NBFCs were the client of the Appellant and the Appellant was promoting the services namely sanctioning of car-loans to the loan seekers - this matter is no longer res integra because the Tribunal has examined this issue and held that such services were covered under the scope of the definition of Business Auxiliary Service prior to 10-9-2004. Extended period of limitation - The period involved in this appeal is prior to 10-9-2004. The Show Cause Notice was issued on 31-7-2007. This Appellant is paying service tax from 10-9-2004. As can be seen from the discussions above the matter was being interpreted by judicial forums in different ways as may be seen from the decisions quoted by the Appellants. - Higher Courts have been taking the view that in such situations the extended period of time cannot be invoked for raising demand - Appeal is allowed

Summary

Issues:
Whether service tax is applicable on the commission received by the appellants for marketing car loans from banks and NBFCs.
Exemption under Notification 25/2004-S.T. and Notification 14/2004-S.T.
Time-barred demand and applicability of the extended period for raising demand.

Analysis:
The Appellants entered into agreements with banks and NBFCs to market car loans, receiving commissions. The primary issue is whether service tax is leviable on these commissions under "business auxiliary service." The activities performed by the Appellants, as detailed in the Show Cause Notice, involve promotional material display, customer scrutiny, and acting as an intermediary between banks and customers. The definition of Business Auxiliary Service during the relevant period and thereafter encompassed activities related to promotion, marketing, customer care, and support services, including the evaluation of prospective customers.

The Appellants contested the tax demand, citing exemptions under Notification 25/2004-S.T. and Notification 14/2004-S.T. The Notification 14/2004-S.T. exempts specific services provided to clients by commercial concerns, which did not apply to the Appellants' activities. Notification 25/2004-S.T. exempts certain taxable services, including those related to banking and financial services. The Appellants argued that their services, though classified as Business Auxiliary Service, were in connection with banking and financial services, thus qualifying for exemption under this notification.

Regarding the time-barred demand, the Appellants argued that the demand beyond the one-year limit was unsustainable. They referenced judicial precedents, such as the case of Bridgestone Financial Services, where the Tribunal granted relief due to the demand being raised beyond the stipulated time limit. The Appellants contended that the demand in their case was also beyond the permissible time limit, aligning with the judicial interpretation that the extended period cannot be invoked for raising demands in such situations.

In conclusion, the Tribunal allowed the appeal of the Appellants, emphasizing that the demand was beyond the statutory time limit and, therefore, unsustainable. The decision highlighted the judicial stance on time-barred demands and the Appellants' eligibility for exemption under Notification 25/2004-S.T. based on the nature of their services in relation to banking and financial services.