2015 (7) TMI 891 - AT - Service Tax

Demand of service tax - Business Auxiliary Services - benefit of exemption Notification No 13/2003-ST dated 20.6.2003 - held that - Adjudicating Authority vide Order dt 31.8.2006 in first appeal observed that in terms of the different clauses of the agreements, the appellants were providing after sales service in relation to the equipments sold to the clients within the appellants territory, installation, maintenance, care etc., of such equipments which are major components of the services, to be rendered by the appellant to the client. In fact, the payment of service charge to the appellant is depending on the appellants satisfactorily discharging after sales service components of the agreement. Pertinently, all these components of services are covered under Business auxiliary Services (BAS) in their own right and covered under Clause 3 (iii) and (iv) of the definition of BAS. Clause 3(iii) and (iv) of the definition of BAS provides any Customer Care Service provided on behalf of the client or any incidental or auxiliary support service such as billing, collection or recovery of cheques/accounts and remittance, evaluation of prospective customer and public relation service. The show cause notice dtd 1.9.2004 was issued for the period 1.7.2003 to 31.3.2004 proposing demand of tax under the category of BAS. But, the second show cause notice dtd 21.10.2004 was issued for the period October 1999 to June 2004 proposing the demand of tax under the category of C&F agent for the same activities, rendered by the appellant. The facts of the case in both the adjudication orders are contrary and misconceived. - findings of both the adjudicating authorities are contrary on facts and law of the case, which cannot be improved by letter dtd 18.5.2015 of the Joint Commissioner of Central Excise, Customs and Service Tax. In our considered view, the Adjudicating Authority should have decided both the show cause notices together and after determining the facts of the case in proper manner, the classification of the service would be decided. It should be noted that reasons are the links between the materials on which certain conclusions are based and the actual conclusions. So, both the impugned orders cannot be sustained. - Decided in favour of assessee.

Issues:
1. Classification of services under Business Auxiliary Services (BAS) and Clearing and Forwarding Agency (C&F) Service.
2. Denial of exemption benefit under Notification No 13/2003-ST.
3. Imposition of penalties.
4. Barred demand of tax.
5. Contradictory findings in two show cause notices.

Detailed Analysis:
1. The case involved a dispute regarding the classification of services provided by the appellants under Business Auxiliary Services (BAS) and Clearing and Forwarding Agency (C&F) Service. The Adjudicating Authority confirmed the demand of Service Tax under both categories for different periods based on the agreements with clients. The appellants argued that they were acting as Commission Agents for the sale of goods, emphasizing the predominant nature of the sale of goods in the agreements. They sought the benefit of exemption under Notification No 13/2003-ST. The authorities and the appellants presented conflicting interpretations of the agreements, leading to the need for a reevaluation of the classification of services provided.

2. The denial of the benefit of exemption under Notification No 13/2003-ST was a crucial issue raised by the appellants. They contended that the denial was unjustified as the services provided fell within the scope of the notification. The appellants argued for a liberal interpretation of the notification to avail the exemption benefits. The Adjudicating Authority's decision to deny the exemption was challenged based on the nature of activities and the applicability of relevant legal precedents.

3. The imposition of penalties was disputed by the appellants, who argued that the issue primarily revolved around the classification of services and the claim for exemption under the notification. They contended that penalty imposition was unwarranted in such circumstances. The appellants sought relief from penalties based on the nature of the dispute and the legal interpretations presented.

4. The appellants raised the issue of the demand of tax being barred by limitation, emphasizing that the authorities were aware of the activities through earlier show cause notices. They argued that the demand for tax on the same services for different periods was unjustified and should be considered time-barred. The appellants relied on legal precedents to support their argument regarding the limitation on the demand for tax.

5. The contradictory findings in two show cause notices regarding the classification of services and the period of demand created confusion and led to inconsistent decisions by the Adjudicating Authorities. The appellants highlighted the discrepancies in the orders and sought a coherent determination of the classification of services for the entire period in question. The need for a consolidated approach to address the issues raised in both show cause notices was emphasized to ensure a fair and accurate decision on the classification of services provided by the appellants.

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