2016 (10) TMI 460 - AT - Service Tax

Business auxiliary services (BAS) - activity of intermediary between Bank and their prospective clients who required a loan for the purchase of a motor vehicle - Held that - the appellant is entitled to the benefit of Notification 25/2004 and eligible for both (d) as well as (e) Clause and they were not liable to pay service tax prior to 10.09.2004. Further the period in dispute in this case is July 2003 to September 2004. Therefore in our view the period of dispute is covered under the exemption Notification and the appellants are entitled to the benefit of the said Notification and consequently are not liable to pay service tax. - Decided in favor of assessee.

Summary

Issues: Appeal against service tax demand, Exemption under Notification No. 25/2004-ST, Interpretation of Clauses (d) and (e) of the Notification.

Analysis:
1. The appeal was directed against the order upholding a service tax demand by the Commissioner (Appeals) and Assistant Commissioner. The appellant, a partnership firm, had an agreement with a bank to provide services listed in the agreement. The department alleged the appellant was providing Business Auxiliary Service without paying service tax. A show-cause notice was issued, leading to the demand of service tax, interest, and penalty. The Assistant Commissioner confirmed the demand, which was upheld by the Commissioner (Appeals).

2. The Tribunal allowed the appeal, stating the appellants were entitled to exemption under Sl. No. (e) of Notification No. 25/2004-ST. However, the High Court disagreed, ruling the appellant was not eligible for exemption under Clause (e) but directed consideration of Clause (d). Subsequently, the Supreme Court set aside the High Court's order and remanded the matter back to the Tribunal to consider both Clause (d) and (e) of the Notification.

3. The appellant argued that they acted as a facilitator between the bank and clients, providing services on behalf of the bank, making them eligible for exemption under both Clauses (d) and (e) of Notification No. 25/2004. The appellant contended that the services were related to banking and financial services, as per the agreement. The relevant clauses of the Notification were reproduced for reference.

4. The AR supported the findings in the impugned order, while the Tribunal, after reviewing the agreement between the appellant and the bank, concluded that the appellant was entitled to the benefit of Notification 25/2004 under both Clauses (d) and (e). The Tribunal held that the period of dispute fell within the exemption Notification, making the appellants not liable to pay service tax. The impugned order demanding service tax under Business Auxiliary Service was deemed unsustainable, leading to the allowance of the appeal with consequential relief.

This detailed analysis highlights the legal journey of the case, focusing on the interpretation of the Notification clauses and the ultimate decision in favor of the appellant based on the Tribunal's assessment of the agreement and relevant legal provisions.