2015 (2) TMI 1018 - AT - Service Tax

Waiver of pre deposit - Business auxiliary service or banking and other financial services - Held that - Prima-facie, the conclusions recorded by the adjudicating authority on both the services alleged, appears unsustainable. Insofar as BAS is concerned, the service provided by the assessee prima-facie falls within the ambit of export of service in view of the Larger Bench decision in CCE, Chandigarh vs. Paul Merchant Ltd. reported in 2012 (12) TMI 424 - CESTAT, DELHI (LB) . Insofar as BAFS is concerned, prima-facie and in view of the analysis in Association of Leasing and Financial Services Companies vs. Union of India reported in 2010 (10) TMI 4 - SUPREME COURT OF INDIA , particularly in pargraph 20 and 37 (of the report) and the decision of this Tribunal in Commissioner of Service Tax, Delhi vs. M/s.Lufthansa Technik Services India Pvt. Ltd. reported in 2013 (12) TMI 968 - CESTAT NEW DELHI , the transactions do not amount to BAFS and equipment leasing of transactions between the assessee and its customers falls outside the ambit of financial leasing as defined in section 65 (12) read with Section 65 (105) (zm) of the Act. - strong prima-facie case in favour of the petitioner/ appellant. We therefore order waiver of pre-deposit in full and stay all further proceedings for realization of the adjudicated liabilities, pending disposal of the appeal - Stay granted.

Summary

Issues:
1. Appeal against adjudication order for service tax liability on business auxiliary service (BAS) and banking and other financial services (BAFS).
2. Whether the service provided by the assessee falls within the ambit of export of service under the Finance Act, 1994.
3. Determination of whether the lease transactions amount to financial leasing under the relevant sections of the Act.

Analysis:
1. The appeal was filed against an adjudication order confirming a cumulative service tax liability on BAS and BAFS provided by the assessee. The order assessed service tax liability for specific periods based on show cause notices issued by the Commissioner, Service Tax, New Delhi. The assessee, a registrant with the department for taxable services, contested the allegations regarding BAS and BAFS.

2. Regarding BAS, the adjudication order concluded that the consideration received by the assessee towards subsidy/reimbursement of expenses for marketing and promotion of products imported from the holding company is taxable under BAS. The assessee argued that the expenses were incurred to augment its own business activities in India and should not be characterized as a service provided to the holding company. Additionally, the assessee claimed that the benefit of its marketing endeavors accrued overseas, constituting an export of service under the Export of Service Rules, 2005.

3. Concerning BAFS, the assessee contended that its lease transactions did not amount to financial leasing as defined in the Act. Despite acknowledging that the leasing of equipment was not financial leasing but operating lease, the adjudicating authority still held the transactions to be under BAFS. However, prima facie analysis indicated that the transactions did not fall under BAFS, as per relevant legal precedents and interpretations.

4. The Tribunal found a strong prima facie case in favor of the petitioner/appellant. Citing legal precedents and interpretations, the Tribunal concluded that the service provided by the assessee potentially qualified as an export of service under the Finance Act, 1994. Similarly, the lease transactions of the assessee were deemed not to constitute financial leasing under the relevant sections of the Act. Consequently, the Tribunal ordered a waiver of pre-deposit and stayed further proceedings for the realization of the adjudicated liabilities pending the appeal's disposal. The stay application was disposed of accordingly.