2018 (2) TMI 746 - AT - Service Tax

Services to cellular phone exporters on behalf of BPL Mobile Cellular Ltd. and were also engaged in collection of bill amounts from the customers and the like for which they receive commission and incentives - Department took the view that the said amounts would constitute taxable income exigible to service tax levied under BAS for the period 01.07.2003 to 09.07.2004 on taxable income of ₹ 20,96,145/- - Held that - the value of commission and incentive received by the appellant from BPL Mobile Cellular Ltd. will definitely form taxable income for the purposes of levy under Business Auxiliary Service during the impugned period. Extended period of limitation - Held that - there is no suppression or mens rea on the part of the appellant, a finding which has not been appealed against by the department. Hence there cannot be any invocation of extended period of limitation. Penalty u/s 76 - Held that - there was reasonable cause for the failure to discharge service tax liability and hence the penalty imposed under Section 76 of the Act, is also set aside. For the purpose of calculation of demand for the normal period, matter is remanded - appeal allowed.

Summary

Issues: Taxability of services provided by the appellant, imposition of penalties under Section 76, 77 & 78 of the Finance Act, 1994, suppression of facts by the appellant, invocation of extended period of limitation, bonafide belief of the appellant regarding tax liability.

The judgment by the Appellate Tribunal CESTAT CHENNAI involved a case where the appellants provided services to cellular phone exporters and collected bill amounts, receiving commission and incentives. The Department contended that these amounts constituted taxable income subject to service tax under Business Auxiliary Service (BAS) for a specific period. The original authority confirmed a demand with interest and imposed penalties under Sections 76, 77 & 78 of the Finance Act, 1994. On appeal, the Commissioner set aside the penalty under Section 78 but upheld the rest of the order. The appellant challenged this decision.

During the hearing, the appellant's counsel argued that the amounts related to the sale of SIM cards should not be taxable services based on a Tribunal decision. The counsel emphasized that the absence of mens rea and the lack of intent to evade service tax were crucial, as per the impugned order. The counsel asserted that since there was no suppression of facts, the extended period of limitation could not be invoked. Additionally, the appellant genuinely believed there was no tax liability, requesting the penalty under Section 76 to be set aside.

The Department supported the impugned order, citing a communication informing the appellant about the service tax levy, which undermined the appellant's claim of a bonafide belief regarding tax liability.

Upon review, the Tribunal found that the sale of SIM cards was not subject to service tax based on the Tribunal's decision cited by the appellant's counsel. However, the commission and incentives received by the appellant were deemed taxable income under Business Auxiliary Service. As there was no suppression or mens rea established by the appellant, the extended period of limitation was inapplicable. Consequently, the demand under Business Auxiliary Service was limited to the normal period, and penalties under Section 76 were set aside due to a reasonable cause for the failure to discharge the tax liability. The matter was remanded to the original authority for reworking the tax liability for the normal period, providing the appellant with a reasonable opportunity to be heard. The appeal was disposed of accordingly.