2015 (2) TMI 46 - AT - Service Tax

Waiver of pre deposit - Classification of service - Business Auxiliary service or Banking and Financial service - appellants were engaged in verifying the personal as well as financial details of prospective/potential customers, conducting field investigation and providing a report of its field investigation to the Bank within the time frame as well as in the form prescribed by the Bank - Held that - activities undertaken by the appellants do not come under any of the categories specified in the services. Learned AR submitted that appellants are engaged in promotion or marketing of the products of M/s. Kotak Mahindra Bank. We are not convinced by this submission. If the Bank requires the appellant to verify and report on the financial position of the prospective/potential customer identified by the Bank and got the report within the time frame/format, it cannot be said that the appellant is marketing/promoting the business of the Bank. Therefore, prima facie, we find that the Service Tax cannot be demanded under BAS. As regards the services to ICICI Bank on which a portion of the demand has been made, we find that the appellants provide service in relation to collection or recovery of cheques/payments/instalments from the borrowers of the loans; field investigation of the customers pertaining to the personal as well as financial details of prospective customers of Bank. Revenue has taken a view that this amounts to provision of service of recovery agent. According to the definition of collection agent/recovery agent, taxable services means any service provided or to be provided to a banking company or a financial institution including a non-banking/financial company or any other body, corporate or a firm, by any person, in relation to recovery of any sums due to such banking company or financial institutions etc. in any manner. We find that a portion of the services rendered is definitely covered by the definition. Both sides could not quantify the exact amount of tax attributable to this service. But roughly, it was agreed that the amount can be around ₹ 3 lakhs. Having regard to the facts and circumstances discussed above, in our opinion, appellant should deposit an amount of ₹ 3 lakhs (Rupees three lakhs only) towards Service Tax (principal) and ₹ 2 lakhs (Rupees two lakhs only) towards interest within eight weeks - partial stay granted.

Summary

Issues:
1. Condonation of delay in filing appeal due to medical reasons.
2. Classification of services provided under Business Auxiliary Service (BAS) or Banking and Financial Service (BFS).
3. Taxability of services provided to M/s. Kotak Mahindra Bank.
4. Taxability of services provided to ICICI Bank as recovery agent.

Condonation of Delay:
The appellant sought condonation of a 74-day delay in filing the appeal due to jaundice. The tribunal considered the medical certificate but questioned the delay from the date of receiving the order. Despite the medical reasons, the delay was condoned subject to payment of a nominal amount within a specified period. Failure to comply would result in the appeal's rejection.

Classification of Services - BAS vs. BFS:
The demand for Service Tax arose from services provided to M/s. Kotak Mahindra Bank. The appellant argued that the services should be classified under BFS, not BAS. The tribunal analyzed the definition of BAS under Section 65(19) of the Finance Act, emphasizing activities related to promotion, marketing, customer care, procurement, production, and provision of services. The tribunal found that the services provided did not fall under BAS categories, rejecting the tax liability under BAS.

Taxability of Services to M/s. Kotak Mahindra Bank:
Regarding services provided to ICICI Bank, the tribunal examined the activities related to collection or recovery of cheques/payments/instalments. Revenue viewed this as the provision of services as a recovery agent. The tribunal considered the definition of a collection agent/recovery agent and found that a portion of the services rendered fell within this definition. An amount towards Service Tax and interest was determined, with a compliance deadline set for the appellant.

Conclusion:
The tribunal ruled in favor of the appellant regarding the classification of services under BAS and granted relief on tax liability. However, for services provided to ICICI Bank, a portion was deemed taxable, and specific amounts were directed to be paid within a stipulated timeframe. Compliance with the tribunal's directives would result in the waiver of pre-deposit requirements and a stay against recovery for a specified period.