2012 (7) TMI 810 - AT - Service Tax

Waiver of predeposit of service tax - commission and discount received non-payment of service tax on business auxiliary services - applicant s plea was that they were registered as sub-broker of mutual fund distributors and that the said income was on account of distribution of mutual fund on which service tax liability had been discharged by the authorized body Held that - They have procured mutual fund subscription - applicants are not mutual fund distributors nor they are agents thereof. The applicants could not produce any evidence in this regard - applicants also could not produce any evidence that they have received commission directly from mutual fund companies being a registered mutual fund distributors - applicants have not produced any documentary evidence in support of their contentions - applicant is directed to make pre-deposit 25 per cent of the service tax

Summary

Issues:
- Waiver of predeposit of service tax, educational cess, and penalties under various sections of the Finance Act, 1994.
- Interpretation of the definition of Business Auxiliary Service (BAS) and applicability of exemptions.
- Evidence of services provided to Mutual Fund Distributors and Asset Management Companies.
- Eligibility for exemption under Notification No.13/2003-ST.
- Prima facie case for total waiver of pre-deposit and financial hardship.

Analysis:
The applicant sought a waiver of predeposit of service tax, educational cess, and penalties under different sections of the Finance Act, 1994 amounting to Rs. 68,03,086. The applicant, registered as a sub-broker of mutual fund distributors, faced a case for not paying service tax on business auxiliary services due to receiving commission and discount. The department confirmed the demand and penalties as the applicant failed to provide evidence supporting their plea. The applicant contended that the service provided did not fall under the definition of Business Auxiliary Service (BAS) and cited a Tribunal decision to support their claim.

The department argued that the applicant received commission and discount during the relevant period, but the applicant failed to produce evidence of rendering services to Mutual Fund Distributors and Asset Management Companies. The department maintained that the applicant provided services in procuring orders for the sale of mutual funds on behalf of clients, but the applicant could not substantiate these claims with evidence. The department emphasized that the applicant was not a mutual fund distributor or agent and lacked evidence of receiving commission directly from mutual fund companies.

The Tribunal found that the applicant could not produce evidence of procuring mutual fund subscriptions for specific entities, leading to the conclusion that the benefits of the exemption notification were not applicable. The Tribunal noted the lack of evidence supporting the applicant's contentions and their failure to establish a prima facie case for total waiver of pre-deposit. Citing a High Court decision emphasizing the balance of convenience, the Tribunal directed the applicant to make a pre-deposit of 25% of the service tax within eight weeks, highlighting the consequences of non-compliance.

In conclusion, the Tribunal's judgment focused on the lack of evidence provided by the applicant to support their claims regarding the nature of services provided to mutual fund entities, leading to the decision to require a partial pre-deposit. The judgment underscored the importance of establishing a prima facie case and balancing the interests of both parties in determining the waiver of pre-deposit in such cases.