2017 (9) TMI 896 - AT - Service Tax

Business Auxiliary Services - appellants were agents of ICICI bank and they were providing services for them and received commission from ICICI Bank - whether taxable under the head BAS or otherwise? - Held that - It is pertinent to note that the definition of Business Auxiliary Service had undergone amendment with effect from 10.9.2004 wherein the services provided on behalf of the client was included within the scope of the definition. Prior to that the services rendered for a client were only covered by the definition. The Notification No. 14/2004 dated 10.9.2004 granted exemption to various services provided to a client in relation to Business Auxiliary Service. Another Notification No. 25/2004 of even dated granted exemption to Business Auxiliary Service rendered prior to 10.9.2004. Extended period of limitation - Held that - Mere non filing of returns and non-remittance of tax for rendering Business Auxiliary Service cannot be viewed as suppression of facts with intent to evade tax - the issue being interpretational one we find no ground to invoke the extended period of limitation - penalties also set aside. The appellant is liable to pay the service tax for the normal period - appeal allowed - decided partly in favor of appellant.

Summary

Issues Involved:
Service tax liability on commission received by agents of ICICI bank under Business Auxiliary Service category; Applicability of extended period of limitation for tax demand; Interpretation of Notification No. 25/2004 and its impact on exemption eligibility.

Analysis:

Issue 1: Service Tax Liability on Commission Received

The appellants, acting as agents for ICICI bank, received commission for providing specialized services related to home loans, personal loans, and credit cards. The dispute centered around whether these activities fell under the definition of Business Auxiliary Service. The department argued that the services provided by the appellants constituted promotion or marketing of services provided by the client, thereby falling within the scope of Business Auxiliary Service. However, the appellants contended that their services were provided on behalf of the bank and should not be categorized as falling under the second limb of the definition. The Tribunal noted the amendment to the definition of Business Auxiliary Service effective from 10.9.2004, which included services provided on behalf of the client. Prior to this amendment, only services rendered for a client were covered. The Tribunal observed that the department failed to establish any act of suppression on the part of the appellants. It was held that mere non-filing of returns and non-remittance of tax could not be equated with suppression of facts to evade tax. Consequently, the demand for the extended period was set aside, and the appellants were granted relief based on the interpretation of the relevant notifications and exemption provisions.

Issue 2: Applicability of Extended Period of Limitation

The appellants raised a strong argument on the ground of limitation, emphasizing that the show cause notices invoked the extended period alleging suppression of facts without providing substantial evidence to support such claims. The Tribunal found that the issue was more interpretational rather than indicative of deliberate evasion. Referring to a precedent decision, the Tribunal concluded that the demand for the extended period lacked merit and should be set aside. In one of the appeals (ST/26/2009), part of the period fell within the normal period, leading to a partial liability for service tax. However, the penalties imposed were deemed unjustified and subsequently set aside by the Tribunal.

Issue 3: Interpretation of Notification No. 25/2004

The Tribunal highlighted the significance of Notification No. 25/2004, which granted exemptions to Business Auxiliary Service provided prior to 10.9.2004. The confusion and disputes arising from the amendment to the definition of Business Auxiliary Service and the accompanying exemption notifications were acknowledged. By analyzing the legal provisions and considering the lack of concrete evidence of suppression, the Tribunal ruled in favor of the appellants, granting relief by setting aside the demands and penalties imposed based on the extended period of limitation.

In conclusion, the Tribunal modified the impugned order, setting aside the demands for the extended period and penalties while allowing the appeals in favor of the appellants where the demands were deemed time-barred. The decision was based on the interpretation of relevant legal provisions, exemption notifications, and the absence of clear evidence supporting the allegations of suppression of facts.