2018 (2) TMI 1320 - AT - Service Tax

Business auxiliary service - the commission/fee received by assessee - SCN has been issued on the grounds that the activity rendered by the assessee is covered under the category of business auxiliary service only and not under business support service - Held that - we are unable to fathom how the lower appellate authority has taken the view that the assessee were only evaluating prospective customers with respect to their credit worthiness and process their loan applications and present them to ICICI. Based only on this premise, he has concluded that such evaluation activity has the essential character of support service of business or commerce, which became to be taxed only w.e.f. 1-5-2006; that therefore there cannot be any confirmation of service tax on the assessee under Business Auxiliary Services prior to this period - matter remanded to the original authority for denovo consideration

Summary

Issues:
Classification of services under "business auxiliary service" or "business support service" for service tax liability.

Analysis:
The case involved a dispute regarding the classification of services provided by the respondent to ICICI Ltd. as falling under "business auxiliary service" or "business support service" for service tax liability. The Department contended that the services should be classified as "business auxiliary service" based on the nature of activities performed, while the respondent argued that their services fell under "business support service" which only attracted service tax liability from 01-05-2006.

The Department highlighted that the definition of "business auxiliary service" prior to 09.09.2004 included incidental services like "evaluation of prospective customers," and even after an amendment in 10-09-2004, certain activities such as "evaluation or development of prospective customer or vendor" were taxable. They argued that the services provided by the respondent specifically fell under "business auxiliary service" due to the nature of the agreements with ICICI Ltd.

On the other hand, the respondent contended that their activities correctly fell under "business support service," emphasizing that this service was only taxable from 01-05-2006. They presented a "sourcing agent agreement" to support their claim, stating that the nature of services provided to ICICI Home Finance Ltd. aligned more with "business support service."

Upon hearing both sides and reviewing the facts, the Tribunal noted discrepancies in the period mentioned in the show cause notice and agreements referred to in the case. The Tribunal found that the lower appellate authority's conclusion that the respondent's activities involved evaluation of prospective customers was not supported by the agreements provided. As a result, the Tribunal decided to remand the matter to the original authority for a fresh consideration. The adjudicating authority was directed to analyze the agreements thoroughly to determine whether the services rendered were indeed "business auxiliary services" or "business support service" and make a decision accordingly, allowing the appellants the opportunity to present any additional evidence.

Ultimately, the appeal was allowed by way of remand, with the case requiring further examination by the original authority to clarify the classification of services and the corresponding service tax liability based on the nature of the agreements and activities performed by the respondent.