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2016 (1) TMI 846 - AT - Service TaxMarketing and advertising activities undertaken for ICICI Bank - Business Auxiliary Service or Not - Commissioner (Appeals) held that services rendered did not fall under BAS - Extended period of limitation - Levy of penalty - Held that - neither at the time of adjudication at the primary level nor at the first appellate level, the issue of time bar was raised, though it being a mixed question of fact and law, it can be raised at this stage. However, we find that the nature of service rendered was such that it was clearly covered under the definition of BAS. The respondent has not been able to demonstrate as to how and on what basis it had a bonafide belief that the impugned service did not fall under BAS. Bonafide belief is not a hallucinatory belief; it is a belief of a reasonable person working in appropriate environment. It can hardly be the respondent s case that it was guided by CESTAT judgment. Revenue s appeal allowed except that penalty under section 76 is set aside and penalty under section 78 is reduced to 25% of ₹ 5,82,025/- provided the respondent pays the entire amount of service tax alongwith interest and reduced (25% of ₹ 582025/-) penalty within 30 days of receipt of this order. It is clarified that amount already paid towards the impugned demand /interest penalty will be counted for this purpose. - Decided in favor of Revenue.
Issues:
1. Classification of service under Business Auxiliary Service (BAS) 2. Time bar for demand 3. Penalty under sections 76 and 78 of the Finance Act, 1994 Analysis: 1. Classification of service under Business Auxiliary Service (BAS): The appeal involved a dispute regarding the classification of services under Business Auxiliary Service. The primary adjudicating authority had confirmed a service tax demand under BAS, which was set aside by the Commissioner (Appeals) stating that the services rendered did not fall under BAS. The Revenue contended that the services provided by the appellant, as per the agreement with ICICI Bank, fell under BAS. The Revenue relied on a previous CESTAT judgment to support their argument. The respondent did not contest the classification under BAS but raised concerns about confusion in classification and invoked the issue of time bar. The Tribunal held that the service provided by the appellant clearly fell within the definition of BAS as per the agreement and previous judgments. The Tribunal noted that the respondent failed to demonstrate a bona fide belief that the service did not fall under BAS, and upheld the classification under BAS. 2. Time bar for demand: The respondent argued that the demand was time-barred due to the absence of wilful misstatement or suppression. The issue of time bar was raised at a later stage despite not being brought up during the primary adjudication or the first appellate level. The Tribunal considered this a mixed question of law and fact. It was observed that the respondent had already deposited a significant amount, and the nature of the service clearly fell under BAS. The Tribunal found that the confusion regarding classification did not justify invoking the extended period for demand, as the respondent failed to show a reasonable belief that the service was not covered under BAS. 3. Penalty under sections 76 and 78 of the Finance Act, 1994: Regarding the penalty, the Tribunal set aside the penalty under section 76 and reduced the penalty under section 78 to 25% of the total amount, provided the respondent paid the entire service tax, interest, and the reduced penalty within 30 days. The Tribunal referenced judgments from Punjab & Haryana High Court and Gujarat High Court regarding penalties under sections 76 and 78, emphasizing that in certain situations, imposition of penalty under section 78 may not justify penalty under section 76. The Tribunal granted the respondent the option to pay the reduced penalty at the appellate stage. In conclusion, the Tribunal allowed the Revenue's appeal, upheld the classification under BAS, addressed the time bar issue, and modified the penalties under sections 76 and 78, providing specific conditions for compliance by the respondent within a specified timeframe.
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