2014 (6) TMI 659 - AT - Service Tax

Demand of Service Tax - Business auxiliary services - to approach, discuss, inform, market and sell to various persons various vehicle finance schemes - whether in the nature of provision of Service on behalf of clients or promotion and marketing activities - exemption under Notifications Nos. 14/2004-ST & 25/2004-ST - penalties under Sec 76,77 and 78 - Held that - Appellants service are not covered under the scope of provision of services on behalf of the clients , the benefit of the said exemption Notifications is not available to them.. Agreement between M/s. TFL and the Appellants is so clearly worded regardings the activities to be carried out by the Appellants that it leaves no scope for any ambiguity whatsoever, leave alone the ambiguity even remotely amenable to the interpretation that their services did not fall under the category of promotion and marketing and/or that they were providing services to the potential loan seekers on behalf of Ms. TFL and not to M/s. TFL. Levy of penalty - Held that - Obviously, the Appellants deliberately chose not to pay Service Tax and then sought to justify their action by trying to put fourth an interpretation which is so grossly untenable and devoid of any basis that no reasonable person even with the fullest sympathy with the Appellants would buy their contention. They did not even take Service Tax registration and so obviously also did not file any Service Tax returns. In these circumstances their plea that it was a matter of interpretation is totally untenable. Consequently, there is no infirmity with regard to the Appellants liability to penalty which is patently leviable on them - Decided against assessee.

Summary

Issues:
- Interpretation of service provided under an agreement
- Applicability of exemption notifications
- Liability to penalty for non-payment of Service Tax

Interpretation of service provided under an agreement:
The appeal involved a dispute between M/s. N-Teek Financials and the tax authorities regarding the nature of services provided under an agreement with M/s. Tata Finance Ltd. The Appellants claimed that the services rendered fell under the category of 'provision of Service on behalf of clients,' exempt under specific notifications. However, the tribunal analyzed the agreement terms and activities undertaken by the Appellants, concluding that the services provided were related to promotion and marketing for M/s. TFL, not on behalf of M/s. TFL. The tribunal highlighted that the Appellants were paid by M/s. TFL directly for the services rendered and had no direct agreement with potential loan seekers. Therefore, the tribunal rejected the contention that the services were covered under 'provision of services on behalf of the client.'

Applicability of exemption notifications:
The tribunal examined Exemption Notifications No. 14/2004-ST and 25/2004-ST dated 10.09.2004 to determine if the services provided by the Appellants were eligible for exemption. As the tribunal established that the services did not fall under the scope of 'provision of services on behalf of the client,' the benefit of the exemption notifications was deemed unavailable to the Appellants. This analysis was crucial in determining the tax liability of the Appellants and formed a significant part of the judgment.

Liability to penalty for non-payment of Service Tax:
Regarding the Appellants' argument that penalty imposition was not justified due to the matter being a subject of interpretation, the tribunal disagreed. The tribunal emphasized that the agreement clearly outlined the activities to be performed by the Appellants, leaving no room for ambiguity. The tribunal concluded that the Appellants deliberately evaded paying Service Tax, as evidenced by their failure to register for Service Tax and file returns. Consequently, the tribunal found the Appellants liable for penalty under sections 76, 77, and 78 of the Finance Act 1994. The tribunal rejected the plea that the matter was subject to interpretation and upheld the penalty levied on the Appellants.

In conclusion, the tribunal dismissed the appeal filed by M/s. N-Teek Financials against the Order-In-Appeal confirming the demand of Service Tax. The judgment provided a detailed analysis of the agreement terms, exemption notifications, and penalty imposition, establishing the tax liability of the Appellants based on the nature of services provided and their compliance with tax regulations.