2008 (6) TMI 94 - AT - Service Tax

Applicants are engaged in arranging finance/loans for their customers from banks and financial institutions and in return receive commissions from the banks for promoting the loans and finance scheme - held that the assessee is providing Business Auxiliary Service to the banks for consideration, therefore, is liable to pay Service tax as provider of Business Auxiliary Service. In view of this, we find it is not a fit case for waiver of amount of Service tax.

Summary

Issues:
1. Whether the applicant is liable to pay Service tax as a provider of Business Auxiliary Service.
2. Whether the applicant's contention of not providing service to banks or financial institutions but to customers is valid.
3. Whether the applicant's request for waiver of pre-deposit of Service tax and penalties should be granted.

Analysis:

Issue 1: Liability to pay Service tax as a provider of Business Auxiliary Service
The Tribunal confirmed the demand for Service tax on the applicant after considering them as providers of Business Auxiliary Service. The Tribunal referred to previous judgments, such as Malpani Finance v. Commissioner of Central Excise and Commissioner of Central Excise v. R.S. Financial Services, where it was held that in similar situations, the assessee is providing Business Auxiliary Service to banks for consideration, thus making them liable to pay Service tax. The Tribunal concluded that the applicant falls under the category of providing Business Auxiliary Service and therefore is required to pay the Service tax.

Issue 2: Validity of the applicant's contention
The applicant argued that they are not providing service to banks or financial institutions but to customers by introducing them to banks, and the commission received is part of the processing fee charged by the banks. However, the Tribunal rejected this argument based on the established precedent that in such cases, the service provided by the applicant is considered as Business Auxiliary Service to the banks. The Tribunal emphasized that the consideration received by the applicant from the banks for promoting loans and finance schemes qualifies as providing a taxable service.

Issue 3: Request for waiver of pre-deposit of Service tax and penalties
The applicant filed applications for the waiver of pre-deposit of the total amount of Service tax and penalties. However, the Tribunal, based on its findings regarding the nature of services provided by the applicant and the liability to pay Service tax, ruled that it was not a fit case for the waiver of the Service tax amount. The Tribunal directed the applicant to deposit the entire Service tax amount within a specified period and waived the pre-deposit of penalties for the appeal hearing upon compliance with the payment deadline.

In conclusion, the Tribunal upheld the demand for Service tax on the applicant, considering them as providers of Business Auxiliary Service to banks. The applicant's contention of providing services to customers rather than banks was dismissed, and the request for waiver of pre-deposit of Service tax and penalties was denied, with specific instructions for compliance with the payment deadline.