2016 (11) TMI 19 - AT - Service Tax

Levy of tax - services of Promotion and Marketing of Car Loan and Personal Loan - Direct Sales Agent - whether the services will fall under the head Business Auxiliary services, which have been introduced from 1/7/2003 and the tax to be levied on the said service? - Held that - decision in the case of Bridgestone Financial Services Vs. Commr of S.T. Bangalore 2007 (1) TMI 67 - CESTAT, BANGALORE followed as well as Board Circular dated 16/11/2006 relied upon where it has been settled that service provided by the appellant to HDFC bank is classifiable as Business Auxiliary Services and liable for service tax. Time bar - as per the confusion and doubt prevailing in respect of impugned service, the appellant entertained the bonafide belief that whethe any service provided to HDFC bank is classifiable under Business Auxiliary services or Business Support Services. As regard the Business Support Service it became taxable only from 1/5/2006, even there were some judgments wherein it was held that the identical services is of Business Support Service therefore it cannot be said that the appellant has intentionally avoided the payment of service tax. The issue was not free from doubt as even the board also realized and issued a circular dated 6/11/2006 by which it was clarified that the services in question will fall under the category of Business Auxiliary Services and thus it is taxable - due to interpretation of classification of services extended period cannot be invoked - It is settled law that where in the case, the issue involved is of interpretation of law, the extended period cannot be invoked. The period involved is July,2003 to May, 2005 whereas the show cause notice was issued on 29/5/2006. As per the discussion made herein above extended period cannot be invoked therefore service tax demand upto March 2005 is hit by limitation therefore demand pertaining to the period July, 2003 to March , 2005 deserves to be set aside. As regard the demand for the period April and May, 2005 in respect of services provided to HDFC bank towards promotion and marketing of loan under Business Auxiliary Services, the same requires re-quantification on the ground that Adjudicating authority has not conclusively established that what is the actual receipt of service charges by the appellant during the period April, 2005 and May, 2005. Sales commission on vehicle - N/N. 14/2004-ST dated 10/9/2004 - Held that - the appellant is proprietary concern therefore they are prima facie eligible for above referred exemption notification as the services is covered under provisions of services on behalf of client which is one of the services specified under the notification. However Ld. Adjudicating authority has not given any findings as regard the claim of this notification categorically made by the appellant before him - eligibility of this Notification should be re-considered by the Adjudicating authority - As regard the penalties imposed under Section 76, 77 and 78, we find that as per our above discussion on limitation, there is bonafide belief of the appellant for non payment of service tax, the appellant has been able to reasonable cause for invocation of Section 80 - the demand being time bar penalties under Section 76,77 and 78 require to be set aside invoking Section 80. Appeal disposed off - decided partly in favor of appellant.

Issues Involved:
1. Classification of services under Business Auxiliary Services.
2. Invocation of the extended period for demand of service tax.
3. Eligibility for exemption under Notification No. 14/2004-ST.
4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Classification of Services under Business Auxiliary Services:
The appellant rendered services of 'Promotion and Marketing' of Car Loan and Personal Loan as a Direct Sales Agent (DSA) for HDFC Bank. The Revenue classified these services under Business Auxiliary Services (BAS) introduced from 1/7/2003. Additionally, the appellant received commissions from car dealers/manufacturers, which were also classified under BAS by virtue of Notification No. 8/2004-ST dated 9/7/2004. The adjudicating authority confirmed the classification of these services under BAS and demanded service tax accordingly.

2. Invocation of the Extended Period for Demand of Service Tax:
The appellant argued that there was significant confusion regarding the classification of the services, leading to litigation in various cases. The confusion was whether the services fell under BAS or Business Support Services (BSS), which became taxable only from 1/5/2006. This confusion was acknowledged by the Board's Circular dated 6/11/2006, which clarified that such services should be classified under BAS. The Tribunal noted that due to the prevailing confusion and conflicting judgments, the extended period could not be invoked. The Tribunal referenced multiple cases, including Bridgestone Financial Services and Roshan Motors Ltd., where it was held that the extended period could not be invoked in cases involving interpretation of law.

3. Eligibility for Exemption under Notification No. 14/2004-ST:
The appellant claimed exemption under Notification No. 14/2004-ST dated 10/9/2004 for the commission received towards the sale of vehicles. The Tribunal found that the appellant, being a proprietary concern, was prima facie eligible for the exemption, as the services provided were covered under 'provision of services on behalf of the client,' one of the services specified under the notification. However, the adjudicating authority had not provided a conclusive finding on this claim. The Tribunal directed the adjudicating authority to reconsider the eligibility for this exemption.

4. Imposition of Penalties under Sections 76, 77, and 78:
The Tribunal noted that the appellant had a bona fide belief regarding the non-payment of service tax due to the prevailing confusion and conflicting views on the classification of services. Citing Section 80 of the Finance Act, 1994, the Tribunal found that the appellant had a reasonable cause for non-payment of service tax and set aside the penalties imposed under Sections 76, 77, and 78.

Conclusion:
The Tribunal passed the following orders:
(a) The demand for the period from July 2003 to March 2005 in respect of BAS related to HDFC Bank was set aside as time-barred.
(b) The service tax demand for April and May 2005 required re-quantification by the adjudicating authority.
(c) The demand of ?1,42,114 related to BAS (commission on the sale of cars) required reconsideration applying Notification No. 14/2004-ST by the adjudicating authority.
(d) The penalties imposed under Sections 76, 77, and 78 were set aside.

The appeal was partly allowed in these terms.

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