2008 (5) TMI 27 - AT - Service Tax

Appellants supplied Automatic Teller Machines (ATMs) for the period from July 2003 to March 2005 Revenue contended that appellants rendered the cash replenishment services & caretaker services for the above period and these would fall under Business Auxiliary Service - automatic teller machine services came under the Tax net only w.e.f. 1.5.2006 and also the cash replenishment has also been included in the said services - hence tax cannot be levied for the period prior to that date

Summary

Issues:
Liability of Service Tax on supply of ATMs, classification under "Business Auxiliary Services," valuation of services chargeable to Service Tax.

Liability of Service Tax on supply of ATMs:
The appeal was against an Order-in-Original passed by the Commissioner of Service Tax, Bangalore, regarding non-payment of Service Tax by the appellants for supplying ATMs. The Revenue argued that the appellants did not pay Service Tax for commissioning or installation services. The appellants contended that prior to 1.5.2006, ATMs were not taxable, and the services provided by them did not fall under "Business Auxiliary Services." The Tribunal noted that the definition of ATM services was introduced only from 1.5.2006, and cash replenishment was included in these services. Citing precedents, the Tribunal held that services introduced as a separate category with a specific effective date have prospective effect only. Relying on the Dyebolt case, the Tribunal concluded that the services in question could not be subjected to Service Tax for the period before 1.5.2006. The appeal was allowed.

Classification under "Business Auxiliary Services":
The Revenue argued that the commissioning and installation of ATMs by the appellants fell under Commissioning and Installation Services even before 1.5.2006, making them liable to pay Service Tax. They justified the valuation of services for calculating Service Tax based on the price difference between import and sale prices. However, the Tribunal found that the specific definition of ATM services introduced from 1.5.2006 did not apply to the period in question. The Tribunal emphasized that services introduced under a new category have prospective application only, as established by previous decisions. The Tribunal, following the Dyebolt case, held that the services provided by the appellants could not be taxed for the period before 1.5.2006.

Valuation of services chargeable to Service Tax:
The Revenue contended that the price difference between the ATMs imported by the appellants and sold to clients should be considered for calculating Service Tax. However, the Tribunal's analysis focused on the introduction of specific definitions related to ATM services from 1.5.2006. Since the services provided by the appellants did not fall under the taxable category before this date, the valuation method based on import and sale prices was not applicable. The Tribunal, in line with established principles and precedents, concluded that the appellants were not liable to pay Service Tax for the period preceding 1.5.2006. The appeal was allowed, providing consequential relief to the appellants.