2017 (7) TMI 95 - AT - Service Tax

Business Auxiliary service - consideration as brokerage from the borrowers of the loan amount - Held that - no consideration is paid by the money lender - there is no allegation to the effect that the appellants promoted the product or services of borrowers of loan amount, which can be brought under the scope of business auxiliary service in terms of Section 65 (19) of the Finance Act, 1994 - similar set of facts came up for consideration by the Tribunal in Fulchand Tikamchand Vs. CCE & C, Nagpur 2016 (2) TMI 772 - CESTAT MUMBAI , where it was held that In view of an equation that is devoid of an agency relationship with the financier and rules out the provision of a service on behalf of the borrower from whom the appellant receives consideration, the activities of the appellant are outside the ambit of business auxiliary service - appellant are not liable to service tax - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Taxability of consideration received by arranging loans under 'Business Auxiliary Service'.
2. Eligibility of cenvat credit denied to the appellant.

Analysis:

Issue 1: Taxability of consideration received by arranging loans under 'Business Auxiliary Service'
The appeal challenged the order of the Commissioner (Appeals-I), Jaipur, which confirmed the service tax liability against the appellant for arranging loans and receiving brokerage as consideration. The Revenue contended that such consideration is taxable under 'Business Auxiliary Service'. The appellant argued that their activity does not fall under this tax entry as they do not promote the product or service of the borrower. The Tribunal noted that the appellants facilitate loan transactions without promoting the borrower's product or service, which is a key requirement for classification under 'Business Auxiliary Service'. Referring to a previous case, the Tribunal emphasized that the appellant's activities do not meet the criteria of a commission agent as per Section 65(19) of the Finance Act, 1994. The Tribunal concluded that the appellant's activities are outside the scope of business auxiliary service, and therefore, they are not liable to pay service tax.

Issue 2: Eligibility of cenvat credit denied to the appellant
The original authority denied cenvat credit to the appellant, which was upheld in the impugned order. However, during the appeal hearing, the appellant did not press for their case regarding cenvat credit as they were unable to produce the necessary documents. Consequently, the Tribunal decided that the impugned order denying cenvat credit would stand. Therefore, the appellant's appeal on this issue was not successful, and the denial of cenvat credit was upheld.

In summary, the Appellate Tribunal CESTAT New Delhi ruled in favor of the appellant regarding the taxability of consideration received for arranging loans under 'Business Auxiliary Service', stating that the appellant's activities did not fall within the scope of this service. However, the denial of cenvat credit to the appellant was upheld due to the lack of supporting documentation.