2015 (5) TMI 741 - AT - Service Tax

Waiver of pre deposit - Business Auxiliary Service - Reverse charge mechanism - Revenue neutrality - Held that - CAI were providing the services to the customers of the appellants as per the agreement between CAI and the appellants and the payment for the same was made by the appellants to CAI. Thus, CAI was engaged in providing services in relation to provision of service on behalf of client which in this case is the appellants. Thus, prima facie the services received by the appellants are classifiable under BAS - what is of precedential value is not the judgement but the ratio of judgement. As regards the contention of the appellants that they Were receiving Technical Testing and Analysis service, it is seen that the said service is defined under Section 65 (105) (zzh) as to any person by a technical testing and analysis agency, in relation to technical testing and analysis . It can be hardly anybody s case that the appellants were receiving services from CAI in relation to Technical Testing and Analysis because nothing belonging to appellants was subjected to technical testing and analysis. - unable to locate any statutory or constitutional provisions which support the notion that in case of revenue neutrality the liability to tax abates. Further whether there has been wilful mis-statement or suppression of facts on the part of appellants is to be determined with reference to the facts and circumstances of the case which requires detailed analysis which can be taken up only at the time of final hearing. - Partial stay granted.

Summary

Issues:
1. Classification of services received from abroad under Business Auxiliary Service (BAS) or Technical Testing and Analysis service.
2. Applicability of reverse charge mechanism for service tax.
3. Invocation of extended period for demand.
4. Revenue neutrality argument.
5. Pre-deposit requirement for appeal.

Classification of Services:
The Appellate Tribunal considered a case where services were received from a foreign service provider, CAI, and the question was whether these services fell under Business Auxiliary Service (BAS) or Technical Testing and Analysis service. The Tribunal noted that CAI provided services to the appellants' customers as per the agreement, making it a case of service provision on behalf of the client. The Tribunal found that the services received were classifiable under BAS as CAI was engaged in providing services on behalf of the appellants.

Applicability of Reverse Charge Mechanism:
The Tribunal analyzed the argument presented by the appellants that the services received were not BAS but Technical Testing and Analysis service. The appellants contended that the service was not provided on their behalf, but directly to the customers. However, the Departmental Representative argued that the services were covered under the definition of BAS. The Tribunal upheld that the services received were indeed covered under BAS, rejecting the appellants' contention.

Invocation of Extended Period:
Regarding the invocation of the extended period for demand, the Tribunal found that the services received by the appellants were prima facie classifiable under BAS. The Tribunal highlighted a judgment to emphasize that the classification of services rendered by the foreign service provider was crucial in determining the tax liability. The Tribunal concluded that the extended period could be invoked based on the nature of services provided and the contractual agreements.

Revenue Neutrality Argument:
The appellants raised a revenue neutrality argument, claiming that the case was revenue neutral, and therefore, the extended period should not be invoked. However, the Tribunal noted that there was no legal basis to support the notion that in cases of revenue neutrality, the tax liability abates. The determination of wilful misstatement or suppression of facts required detailed analysis, which could only be done at the final hearing.

Pre-Deposit Requirement:
The Tribunal ordered a pre-deposit of 50% of the adjudicated service tax liability along with proportionate interest within four weeks, as the appellants failed to make a case for a full waiver of pre-deposit. The Tribunal clarified that any previous deposits made towards the demand would be counted. Compliance was required by a specified date, with the stay on recovery of the remaining liabilities contingent on the pre-deposit. Failure to comply would result in the dismissal of the appeal.

In conclusion, the Tribunal upheld the classification of services under BAS, rejected the revenue neutrality argument, and ordered a pre-deposit for the appeal to proceed.