2015 (8) TMI 1137 - AT - Service Tax

Demand of service tax - Business Auxiliary Service - Appellants were also facilitating availment of loans by customers from Banks and financial institutions - Receipt of commission - Held that - In the light of the Larger Bench ruling clarifying contours of BAS, in respect of transactions involving automobile dealers and banks or financial institutions, there was a bona fide doubt as to whether appellants herein had provided BAS during the relevant period in issue. Therefore non-filing of returns and non-remittance of tax for rendition of BAS could not be characterised as arising with a view to suppression of material facts or failure to remit tax with an intent to evade the same, inviting application of the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994. Period in issue in the present appeals is July 2003 to November 2005. Show cause notice was issued on 31.1.2006. Only part of the period is therefore within the normal period of limitation. In the light of the fact that there were conflicting decisions of the Tribunal which stood resolved by the Larger Bench decision in Pagariya Auto Center (2014 (2) TMI 98 - CESTAT NEW DELHI (LB)), we are satisfied that invocation of the extended period was not justified - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
- Whether activities of dealers of motor vehicles constitute Business Auxiliary Service (BAS) for service tax purposes.
- Application of extended period of limitation under Section 73(1) of the Finance Act, 1994.
- Liability of appellants to tax, interest, and penalties for the normal period of limitation.

Analysis:

Issue 1: Activities of dealers of motor vehicles as BAS
The appeals were against adjudication orders confirming demands of service tax, interest, and penalties on appellants for providing BAS during a specific period. The appellants, as dealers of cars, facilitated loans for customers from banks and financial institutions, receiving commission for such services. The question was whether these activities fell within the definition of BAS under Section 65(19) and Section 65(105)(zzb) of the law. Conflicting decisions existed on this matter until a Larger Bench clarified the legal position in Pagariya Auto Center case. The Tribunal emphasized that classification as BAS depended on a thorough analysis of transactional documents. If activities aligned with BAS definition, then BAS was provided.

Issue 2: Application of extended period of limitation
Due to conflicting decisions on whether the appellants' activities constituted BAS, there was a bona fide doubt regarding their liability. The non-filing of returns and non-remittance of tax could not be seen as an attempt to evade tax. The show cause notice was issued within the normal limitation period, with only part of the period falling under the extended period. The Tribunal held that the invocation of the extended period was not justified, given the resolution of conflicting decisions by the Larger Bench. The appellants were deemed liable for tax, interest, and penalties for the normal limitation period under Section 73.

Issue 3: Liability of appellants for normal period of limitation
The Tribunal set aside the orders confirming the demands and remanded the matter for re-determination of the appellants' liability for tax, interest, and penalties for the normal limitation period. The primary adjudicating authority was directed to classify the transactions in line with the clarifications from the Pagariya Auto Center case. The appellants were to be given a chance for a personal hearing before any re-determination. No costs were awarded in this matter.