2009 (3) TMI 121 - AT - Service Tax

Demand of Service Tax Show Cause Issued Improperly demanded service tax under a wrong category services where classifiable under travel agent s category but show cause notice issued under business auxiliary category held that even though a part of the period of dispute covers the liability on the appellant, no tax can be collected without issue of a proper Show Cause Notice -In these circumstances, the demand of Service Tax under the category of Business Auxiliary Services is not sustainable Demand and Penalty set aside.

Summary

Issues:
1. Whether the appellant's services fall under the definition of Business Auxiliary Services (BAS).
2. Whether the appellant's activity can be classified as that of a Commission Agent.
3. Whether the demand for Service Tax is sustainable.
4. Whether the appellant's services can be classified as Travel Agent services.
5. Whether the Show Cause Notice was issued correctly.
6. Whether the demand for Service Tax is barred by limitation.
7. Whether the penalties imposed are justified.

Analysis:
1. The appellant contended that their services did not qualify as Business Auxiliary Services as they were not involved in the sale, promotion, or marketing of services provided by the client. They argued that they were merely selling tickets as an agent and not providing any additional services. The Tribunal noted a similar case where it was held that without a proper Show Cause Notice under the relevant category, the demand for Service Tax under BAS was not sustainable. Consequently, the appeal was allowed with consequential relief.

2. The appellant argued that even if their services were considered under BAS, they should be classified as services rendered by a Commission Agent, which was exempt from Service Tax before a certain date. The Tribunal observed that the appellant's services resembled those of a travel agent, which became taxable only from a specific date. As the authorities did not consider this aspect, the Tribunal allowed the appeal following the precedent of a similar case.

3. The appellant raised concerns about the sustainability of the demand for Service Tax. They highlighted that the Show Cause Notice lacked specific classification under BAS, making it vague and invoking a larger time limit unjustified. The Tribunal agreed that without proper categorization and intention to evade tax, the larger time limit could not be applied. Therefore, the demand for Service Tax was limited to a specific period, and the appeal was allowed accordingly.

4. Regarding the classification of the appellant's services as Travel Agent services, the appellant argued that they should be taxed only from a certain date. The Tribunal acknowledged the similarity with a previous case where the demand under BAS was deemed unsustainable without a proper notice under the correct category. Following this reasoning, the appeal was allowed with consequential relief.

5. The appellant challenged the correctness of the Show Cause Notice issuance, claiming it was unjust and illegal. They cited a similar case where the Tribunal set aside the order due to improper notice. The Tribunal considered this argument and allowed the appeal based on the lack of a proper Show Cause Notice under the relevant category.

6. The appellant contended that the demand for Service Tax was barred by limitation, and penalties imposed were excessive. The Tribunal agreed that the penalties were unwarranted given the circumstances of the case. They also limited the demand for Service Tax to a specific period, in line with the appellant's argument, and allowed the appeal accordingly.