2008 (3) TMI 182 - AT - Service Tax

Business of Auxiliary Service (BAS) demand contested for the period prior to 1-5-06 - It is submitted that the same service cannot get classified under two different entries u/s 65 clause (104c) & clause (19) - there is substance in submission of appellants that, for period prior to 1-5-06, they are not liable to pay tax on the services rendered by them, in the category of BAS - appellants have made out prima facie case stay granted for the demand related to period prior to 1.5.06

Summary

Issues Involved:
Challenge against service tax demand under "Business Auxiliary Service" category for specific periods, penalties imposed, waiver of pre-deposit and stay of recovery sought.

Analysis:

1. The judgment by the Appellate Tribunal CESTAT, Chennai involved two cases - one by M/s. Fifth Avenue and another by M/s. Fifth Avenue Wind Mill Pvt. Ltd. The primary challenge in both cases was against the service tax demand under the "Business Auxiliary Service" (BAS) category for different periods, along with penalties imposed on them. The appellants contended that the services they provided should not be classified under BAS but under "support services of business or commerce" introduced in Section 65(104c) of the Finance Act, 1994 from 1-5-2006.

2. The appellants argued that the services they offered, such as evaluating customers, processing orders, customer management, and more, did not fall under BAS but under the newly introduced category of support services. However, the Commissioner upheld the Revenue's view, classifying the services under BAS and confirming the demand. The Commissioner relied on a circular stating the liability to pay service tax on services received from abroad under the reverse charge mechanism due to the alleged retrospective operation of Section 66A of the Finance Act, 1994.

3. The Tribunal found a prima facie case in favor of the appellants regarding the challenge against the service tax demand under BAS for periods before 1-5-2006. It noted that no amendment was made to the pre-existing entry of clause (19) when clause (104c) was inserted, and many services rendered by the appellants aligned with those specified under Section 65(104c). The Tribunal held that the services could not be classified under two different entries and granted waiver of pre-deposit and stay of recovery for the appellants, except for a specific amount.

4. M/s. Fifth Avenue Wind Mill Pvt. Ltd. had already made a payment towards the demand for a specific period, which was not considered by the Commissioner. The Tribunal allowed full waiver of pre-deposit and stay of recovery for this party. The judgment concluded by granting relief to both parties, with M/s. Fifth Avenue required to report compliance by a specified date.

This detailed analysis outlines the key issues, arguments, and the Tribunal's decision regarding the service tax demand and penalties challenged by the appellants in the mentioned cases.