2007 (1) TMI 67 - AT - Service Tax

Demand(Service tax) - Revenue contended that appellant is liable for service tax under Business Auxiliary service on the ground that appellants source customers for personnel loans and housing loan for citi bank - Demand set aside on account of time bar

Summary

Issues:
1. Liability of appellants to pay service tax under "business auxiliary services" for the period from July 2003 to September 2004.
2. Barred by limitation of time - Willful suppression of facts with intent to evade tax.
3. Classification of services under "Support Services of Business or Commerce (SSBC)" or "Business Auxiliary Services (BAS)."
4. Applicability of exemptions and notifications for service tax liability.
5. Taxability of reimbursements received by appellants.
6. Interpretation of DGST Circular on taxation of reimbursements.
7. Cross-objections filed by Revenue challenging the impugned order.
8. Application of extended time limit for invoking tax liability.

Analysis:
1. The appellants were held liable for service tax under "business auxiliary services" for promoting and marketing loans provided by City Bank. The adjudicating Authority confirmed the tax liability and imposed penalties under various sections of the Finance Act 1994. The appellants contested the order, arguing that the demand was beyond the normal period and lacked willful suppression to evade tax.

2. The appellants contended that the show cause notice was time-barred due to the absence of willful suppression with intent to evade tax. They relied on various case laws to support their argument. The Tribunal agreed, stating that the extended period cannot be invoked without evidence of willful suppression, thereby setting aside the demand as time-barred.

3. The classification of services under "Support Services of Business or Commerce (SSBC)" or "Business Auxiliary Services (BAS)" was debated. The appellants claimed their services fell under SSBC, introduced post the disputed period, thus not attracting service tax liability. However, the Tribunal found that the services provided by the appellants, promoting loans for clients, clearly fell under BAS during the relevant period.

4. The issue of exemptions and notifications for service tax liability, as well as the applicability of exemptions on reimbursements, was raised. The appellants argued for revenue neutrality based on exemptions, while relying on DGST Circulars. The Tribunal considered these arguments but primarily focused on the time-bar issue in setting aside the impugned order.

5. The Tribunal also addressed the taxability of reimbursements received by the appellants, citing relevant case laws and circulars to support their decision. They emphasized that the demand for service tax on reimbursements failed entirely, further strengthening the appellants' position.

6. The Revenue filed cross-objections challenging the impugned order, arguing for the correctness of invoking the extended time limit and disputing the appellants' claims for deduction. However, the Tribunal upheld the appellants' contentions and set aside the demand due to the time-bar issue, thereby allowing the appeal with consequential relief.

7. In conclusion, the Tribunal found in favor of the appellants, setting aside the impugned order due to the time-bar issue and ruling in favor of the appellants on the classification of services under BAS. The detailed analysis of each issue and the legal arguments presented by both parties contributed to the Tribunal's decision to allow the appeal.