2011 (5) TMI 833 - AT - Service Tax

Commission agent service - appellant submits that is so far as the procurement of input is concerned that assumed the character of Business Auxiliary Service w.e.f. 10-9-1994. Prior to that date there was no such intention which can be known from the statutory provisions as well as para 18 of the Board s Circular No. B2/8/2004-TRU, dated 10-9-2004. The scope of Business Auxiliary Service only dealt with the marketing side of business prior to that date, such service was exempted from taxation for the period prior to 10-9-2004 Held that - activities so carried out in terms of the agreement was not of taxable nature during relevant period and was not expected to be taxed which is clear from para 18 of the Board s circular when the law itself did not require the appellant to be liable, appeal is allowed

Summary

Issues:
1. Whether the appellant's procurement of input on commission basis constitutes providing commission agent service liable for service tax demand.
2. Whether the appellant's appeal against the order upholding adjudication is valid.
3. Whether the appellant's contention regarding Business Auxiliary Services and taxation under Section 65(105)(zzb) of the Finance Act, 1994 is justified.
4. Whether the demand of duty is barred by limitation.
5. Whether the imposition of penalty on the appellant is justified.
6. Whether the activities of the appellant were of taxable nature during the relevant period.

Analysis:

1. The appellant appealed against the order upholding the adjudication, where it was determined that the procurement of input by the appellant on a commission basis constituted providing commission agent service, leading to a service tax demand. The authority viewed the transaction between the appellant and Ballarpur Industries Ltd. as falling under the category of providing commission agent service, resulting in the imposition of a service tax demand of Rs. 20,60,514 along with penalties and interest.

2. The appellant also filed a Stay Application seeking a waiver of pre-deposit during the pendency of the appeal. The appellant's contention was that the Business Auxiliary Services should be taxed under Section 65(105)(zzb) of the Finance Act, 1994, and the service provided should align with the description in Section 65(19) to determine the scope of taxation.

3. The appellant argued that prior to September 10, 1994, the procurement of input did not fall under the scope of Business Auxiliary Service, as clarified in statutory provisions and circulars. The appellant highlighted the confusion surrounding the taxability of the transactions and emphasized that non-registration and non-filing of returns do not necessarily indicate an intention to evade tax.

4. Regarding the limitation of the demand of duty, the appellant contended that the show cause notice was time-barred under Section 73 of the Finance Act, 1994, as the appellant had submitted statutory service tax returns within the due time. The appellant claimed that the services provided were not taxable as they pertained to procurement of goods and services that were inputs for clients.

5. The Revenue argued that the appellant fell under the sub-category of 'Procurement of goods and services, which are the inputs for the clients' under Business Auxiliary Services and was liable to pay tax as per the relevant notification for the period in question.

6. After hearing both sides and examining the records, it was observed that the appellant's activities were not of a taxable nature during the relevant period, as the law did not require the appellant to be liable for taxation. The appeal was allowed based on the merit of the case, and there was no need to investigate the suppression aspect further.

In conclusion, the judgment favored the appellant, emphasizing that the activities in question were not expected to be taxed during the relevant period, leading to the allowance of the appeal.