2014 (10) TMI 99 - AT - Service Tax

Waiver of pre deposit - procurement of goods and services to the member companies - management consultancy, sponsorship service - Held that - appellant had taken legal opinion and the nature of service provided which is basically assisting in procurement of inputs and taking into account the fact that for demanding service tax, cost of inputs has also been taken into account, we consider that extended period in this case could not have been invoked because all along the appellants were seeking clarification from the department and had made it clear that they had no intention to evade payment of service tax but were interested in fulfilling their statutory obligations. Since appellants have made out a strong prima facie case on limitation itself, we are not going into other issues at this stage. We also take note of the fact that appellants have deposited an amount of ₹ 4,45,82,010/- and ₹ 6,92,291/- also. In view of the above, the requirement of balance dues is waived and stay against recovery is granted during the pendency of appeal - Stay granted.

Summary

Issues:
Company set up by multiple companies within GMR Group for procurement and other services; Contention regarding service tax liability under 'Business Auxiliary Service'; Legal opinion sought and shared with department; Chronology of events leading to show cause notice; Invocation of extended period for demand; Prima facie case on limitation; Deposit made by appellants; Waiver of balance dues and stay against recovery.

Analysis:
The judgment pertains to a company established by various entities within the GMR Group for procuring goods and services and providing management consultancy and other services exclusively to the member companies. The appellant argued that the company was limited by guarantee and did not provide services to entities outside those who had set it up. The appellant's expenses were shared among the group companies based on actual amounts, and the revenue department initiated proceedings demanding service tax and ineligible credit amounting to over Rs. 15.25 crores and Rs. 6,92,291 respectively, only up to 31-3-2009 due to no transactions thereafter.

The appellant had sought legal opinion from an expert in indirect tax matters, which opined that the activity and revenue realized for inputs procured were not subject to service tax as there was no service element involved. The appellant shared this opinion with the department, seeking clarification on their service tax liability. The chronology of events included correspondences between the appellant and the department, with the department indicating that the activity might fall under 'Club or Association Service' category.

The tribunal considered the events, legal opinion, and the nature of services provided by the appellant, emphasizing that the extended period for demand could not be invoked as the appellant sought clarification and demonstrated no intention to evade tax obligations. Given the strong prima facie case on limitation, the tribunal waived the balance dues and granted a stay against recovery during the appeal. The appellants had already deposited significant amounts, further supporting the decision to waive the balance dues.

In conclusion, the judgment highlights the importance of seeking legal opinions, maintaining communication with tax authorities, and demonstrating a willingness to comply with statutory obligations to establish a strong case on limitation and potentially avoid additional liabilities.