2008 (6) TMI 79 - AT - Service Tax

Business Auxiliary Service assessee arranging loan from bank - commission received from bank - Commissioner (Appeals) has proceeded on totally an erroneous footing that, a bank cannot avail of Business Auxiliary Services as a client agreement of assessee with bank make clear that assessee had provide service in relation to promotion/marketing of the Banking and Financial Services provided by the banks - impugned order is set aside - appeal is disposed of by way of remand

Summary

Issues:
1. Whether the respondents are providing Business Auxiliary Service to banks.
2. Interpretation of the definition of 'Business Auxiliary Services.'
3. Determination of the client in the context of service provision.

Analysis:
1. The main issue in this case was whether the respondents were providing Business Auxiliary Service to banks. The Commissioner (Appeals) had held that the respondents were not providing such services as the banks were not their clients. The Tribunal referred to a previous case and highlighted that the essential requirement for levying service tax under Business Auxiliary Service is that the work must be done on behalf of the client and commission must be received from the client. The Tribunal found that the respondents were helping buyers of vehicles in obtaining loans and were providing services to the client of the banks, not to the banks directly. Therefore, the Tribunal concluded that the respondents were not within the scope of Business Auxiliary Service.

2. The Tribunal delved into the interpretation of the definition of 'Business Auxiliary Services.' It was noted that the assessees did not receive any remuneration or fees directly from the client, which was a crucial aspect of the definition. The Tribunal emphasized that there was no value addition by the assessees, who were merely receiving a share of income from the bank without any direct payment from the client. The Commissioner (Appeals) had erred in assuming that a bank could not avail of Business Auxiliary Services as a client. The Tribunal clarified that the assessees were providing services related to the promotion or marketing of banking and financial services offered by the banks, making the banks their clients. The Tribunal highlighted the nature of the agreements and the services provided by the assessees, ultimately setting aside the Commissioner (Appeals) order for reconsideration on merit.

3. The issue of determining the client in the context of service provision was crucial in this case. The Tribunal emphasized that the assessees were providing services to the banks' customers, with the banks being the recipients of these services. The Tribunal highlighted the process where the assessees obtained loan applications from customers, processed them, and forwarded them to the bank, for which they received commission. The Tribunal stressed that once consideration accrued to the assessees from the services provided to the bank, the nature of the receipts was not altered by how the commission was distributed. The Tribunal remanded the case to the Commissioner (Appeals) for a fresh decision based on the nature of the arrangement and the actual flow of commission, emphasizing the importance of examining these aspects thoroughly.

In conclusion, the Tribunal set aside the impugned order and remanded the case for reconsideration on merit, emphasizing the need for a detailed examination of the service provision, client relationship, and commission flow in the context of Business Auxiliary Services.