2014 (8) TMI 783 - AT - Service Tax

Business Auxiliary Service - services relating to Procurement of goods or services, which are inputs for the client - exemption under Notification 14/2004-ST dated 10/09/2004 - Held that - There is no dispute that MKCL is rendering services in the field of computer education and the appellant acts as an authorised lead agency. The functions entrusted to the appellant entail coordination between the authorised training centres (ATCs) and ensure that the courses conducted by the ATCs are as prescribed by MKCL, ensuring adequate infrastructure for conducting the courses, collection of fees, remitting the same to the MKCL and so on. These activities undertaken by the appellant would certainly come within clause (d) of the exemption Notification 14/2004-ST which is a service incidental or auxiliary to any activity specified in clauses (a) to (c) and clause (c) deals with provision of service on behalf of client. It is a settled position in law, as explained by the hon ble apex Court in the case of Mangalore Chemicals and Fertilisers Ltd. 1991 (8) TMI 83 - Supreme Court of India that there are two stages of interpreting an exemption Notification. In the first stage, whether the appellant falls within the exemption clause, strict interpretation is required to be made. Once the appellant falls within the scope of exemption, a liberal construction has to be adopted. As the activity undertaken by the appellant is incidental or ancillary to the provision of service by the client, the appellant falls within the exemption; therefore a liberal interpretation has to be given and the various activities undertaken by the appellant would become eligible for the benefit of the exemption. lower appellate authority s order in denying the benefit of exemption to the appellant during the impugned period is unsustainable - Decided in favour of assessee.

Summary

Issues:
- Confirmation of service tax amount
- Classification of services under 'Business Auxiliary Service'
- Eligibility for exemption under Notification 14/2004

Confirmation of service tax amount:
The judgment involves four appeals challenging the confirmation of service tax amounting to Rs. 32,20,600 for the period April 2005 to March 2012, along with interest and penalties. The lower appellate authority upheld the confirmation based on the services rendered by the appellant falling under the category of 'Business Auxiliary Service.' The appellant contested this decision.

Classification of services under 'Business Auxiliary Service':
The appellant, acting as an authorised lead agency for Maharashtra Knowledge Corporation Ltd. (MKCL), conducted certificate programs on information technology recognized by the Maharashtra State Technical Education Board. The appellant's duties included coordinating training centers, collecting fees, ensuring infrastructure, and promoting IT education. The appellant argued that these activities were incidental to promoting IT education and fell under the exemption provided in Notification 14/2004 for 'business auxiliary services.' The department contended that the appellant was promoting MKCL's business and thus not eligible for the exemption.

Eligibility for exemption under Notification 14/2004:
The Tribunal analyzed the activities undertaken by the appellant and determined that they fell within the exemption clause of being "incidental or auxiliary to any activity specified" and "provision of service on behalf of the client." Citing legal precedent, the Tribunal emphasized the need for strict interpretation to determine eligibility for exemption and a liberal construction once within the exemption scope. As the appellant's activities were deemed incidental to MKCL's services, the Tribunal concluded that the appellant was eligible for the exemption. Consequently, the Tribunal set aside the lower appellate authority's decision and allowed the appeals.

This judgment highlights the importance of interpreting exemption notifications carefully and distinguishing between activities falling within the exemption scope and those outside it. The decision provides clarity on the eligibility criteria for exemption under specific notifications and underscores the significance of the nature of services provided in determining tax liabilities.