2014 (3) TMI 653 - AT - Service Tax

Demand of service tax on fee for pre-closure of loans - Business auxiliary service - Suppression of facts - Held that - Revenue s contention is that the National Housing Bank with which the appellant is associated collects pre-closure charges from the appellant along with the service tax component and the National Housing Bank remits service tax (for an unspecified taxable service) and the appellant avails Cenvat credit on the service tax component remitted to the National Housing Bank, together with the pre-closure fee charged by National Housing Bank. In the circumstances, the appellant must be presumed to be aware of its liability to service tax on the consideration/charges received by it from its customers, i.e. on pre-closure of loans. Since Revenue concedes the position that the transactions in issue do not amount to business auxiliary service and since there is no allegation of the appellant having provided any other taxable service, we fail to comprehend this contention and as to how the appellant s presumed knowledge of its tax liability on fore-closure charges received, would render it liable to service tax, for being provided Business Auxiliary Service, which is admittedly inapplicable - Decided in favour of assessee.

Summary

Issues:
1. Classification of services provided by the appellant.
2. Allegations of service tax evasion and imposition of penalties.
3. Validity of the Show Cause Notice and extended period of limitation.

Classification of services provided by the appellant:
The case involved an appeal against an order confirming the demand of service tax, interest, and penalties on a housing finance company for allegedly providing business auxiliary services. The appellant contended that the charges for pre-closure of loans did not fall under the category of taxable business auxiliary services. The primary authority confirmed the levy without specifying the taxable service. The appellate Commissioner upheld the decision, emphasizing the appellant's registration for business auxiliary services and the responsibility of self-assessment for classification. However, neither authority identified the specific taxable service category for the charges received by the appellant.

Allegations of service tax evasion and imposition of penalties:
The Show Cause Notice accused the appellant of willfully suppressing facts to evade service tax on pre-closure charges collected from customers. The appellant argued against the classification of services as business auxiliary or banking and financial services. The primary authority and the appellate Commissioner failed to determine the exact taxable service for the charges, leading to the appeal's rejection. The judgment highlighted the importance of a clear and specific attribution in a Show Cause Notice and the inability to cure natural justice failures at the appellate stage.

Validity of the Show Cause Notice and extended period of limitation:
The judgment emphasized the necessity of a precise statement of facts, charges, and applicable laws in a Show Cause Notice. It noted that the appellant's services for facilitating loan pre-closures did not fit the definition of business auxiliary services. The appellant's presumed knowledge of tax liability on charges collected did not establish liability for business auxiliary services. The impugned order was deemed unsustainable and quashed, with the appeal allowed without costs due to the lack of a specific taxable service classification for the charges received by the appellant.