2014 (4) TMI 324 - AT - Service Tax

Duty demand - Business Auxiliary Service - Collection of Passenger service Fees - Penalty u/s 76, 77 & 78 - Held that - From statutory definition, it is clear that if a person collects payment for the services rendered by another person and remit the same, then the activity would come under the purview of Business Auxiliary Service as defined in Section 65(19) (vii) and the activity would be leviable to Service tax. Collection of charges for the service rendered is more specifically covered under Business Auxiliary Service and not under Business Support Service . As per the Section 65A of the Finance Act, 1994, which deals with the classification of taxable services, sub-clause (105) of Section 65 which provides the most specific description shall be preferred to sub-clauses providing more general description. In the case before us Section 65(19) read with sub-clause (zzb) to Section 65(105) provides the most specific description. Thus the activity undertaken by the appellant is specifically covered under Business Auxiliary Service and not under Business Support Service . Extended period of limitation - Held that - Appellant did not declare the activity to the Revenue authorities during the relevant period and filed the returns only in October 2006. Only from the returns filed in October 2006, the Revenue came to know about the activity under taken by the appellant. The show-cause notice was issued in June 2007, well within the normal period of one year, from the date of filing returns and, therefore, the demand for the period with effect from 16.6.2005 is clearly sustainable in law. Penalty - As regards the penalty imposed under Sections 76 and 77, as pointed out by the learned A.R. appearing for the Revenue, no mens rea is required to be proved and mere contravention of law would suffice. Therefore the penalties imposed under these sections are sustainable, subject to re-quantification of the amount of the service tax liability from the period w.e.f. 16.06.2005. As regards the penalty imposed under Section 78, it is settled position in law that the said penalty is imposable if any of the elements specified in the said Section i.e. fraud, collusion, suppression, willful mis-statement or contravention of any of the provisions of the law with an intent to evade payment of duty are present. In the present case, the appellant did not declare to the department the activities undertaken by them prior to 01.07.2006. Thus the service tax liability of the appellant has to be quantified for the period w.e.f 16.6.2005 and on such recomputed liability, the interest and penal liabilities would accrue - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Classification of service under Business Auxiliary Service (BAS).
2. Applicability of service tax prior to 01.06.2006.
3. Invocation of the extended period for demand.
4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Classification of Service under Business Auxiliary Service (BAS):
The adjudicating authority classified the service rendered by the appellant, involving the collection of Passenger Service Fees on behalf of the Airport Authority of India, under Business Auxiliary Service (BAS) as defined in Section 65(19) read with Section 65(105)(zzb) of the Finance Act, 1994. The appellant contended that the Passenger Service Fee is a statutory fee collected under the Airport Authority of India Act, 1994, and thus, not a taxable service. However, the adjudicating authority held that the activity of collecting payments for services rendered by another person falls under BAS, specifically under sub-clause (vii) of Section 65(19) as commission agent's service.

2. Applicability of Service Tax Prior to 01.06.2006:
The appellant argued that prior to 01.06.2006, the service was not taxable as Business Support Services (BSS) were brought under the tax net only from that date. The adjudicating authority, however, maintained that the service was taxable under BAS even before 01.06.2006. The Tribunal noted that the definition of BAS was amended, and an explanation was added on 16.06.2005, clarifying that collection of payments for services rendered falls under BAS. Thus, the service was taxable under BAS from the inception of the levy on 01.07.2003.

3. Invocation of the Extended Period for Demand:
The appellant contended that the demand was time-barred as the show-cause notice was issued on 15.06.2007 for the period from July 2003 onwards. The Tribunal observed that the adjudicating authority had acknowledged that prior to 10.09.2004, the activity did not fall under sub-clause (iv) or (vii) of Section 65(19). Furthermore, the explanation added on 16.06.2005 implied that there were doubts about the scope of commission agent's service before that date. Therefore, demands prior to 16.06.2005 could not be made invoking the extended period. However, the demand from 16.06.2005 onwards was found to be legally sustainable as the appellant did not declare the activity to the Revenue authorities and filed returns only in October 2006.

4. Imposition of Penalties under Sections 76, 77, and 78:
The Tribunal upheld the penalties under Sections 76 and 77, noting that no mens rea is required to be proved for these penalties. Mere contravention of law suffices. As for the penalty under Section 78, it was noted that the appellant's failure to declare the activities undertaken prior to 01.07.2006 amounted to suppression of facts, justifying the imposition of the penalty. However, the quantum of the penalty would depend on the recomputed service tax liability from 16.06.2005 onwards.

Conclusion:
The Tribunal concluded that the service rendered by the appellant was rightly classified under BAS and was taxable from 01.07.2003. The demand for the period from 16.06.2005 onwards was upheld, and the penalties under Sections 76, 77, and 78 were found to be sustainable. The case was remanded to the adjudicating authority for re-computation of service tax liability from 16.06.2005 onwards, along with the corresponding interest and penalties. The appeal was disposed of accordingly.