2018 (5) TMI 674 - AT - Service Tax

Extended period of limitation - intent to evade not present - Advertising Agency s Service - Held that - the demand SCN raised in the period 2005-06 and 2006-07 in the year 2010. Thus the entire period falls outside the normal period of limitation - it can be reasonable concluded that there was no intention to evade payment of duty at the bonafide believe at they were not liable to pay duty - appeal allowed on the ground of limitation.

Issues:
1. Confirmation of demand of Service Tax, interest, and penalty under Section 77 & 78 of the Finance Act, 1994.
2. Invocation of extended period of limitation for the period 2005-2006 and 2006-2007.
3. Classification of services provided by the appellant under "Business Auxiliary Services."
4. Liability of the appellant and their subsidiary to pay Service Tax.
5. Interpretation of Circulars issued by CBEC and DGFT regarding subcontracting and Service Tax liability.
6. Failure to mention specific sub-clause of the definition of "Business Auxiliary Services" in the show-cause notice.
7. Appellant's claim of revenue neutrality and availability of credit to the subsidiary for the Service Tax paid.

Analysis:

1. The appeal was filed against the confirmation of demand of Service Tax, interest, and penalty under the Finance Act, 1994. The appellant, engaged in advertisement services, was issued a show-cause notice for providing services to their subsidiary company. The demand was raised under "Business Auxiliary Services" for the period 2005-2007. The appellant argued that the subsidiary was a separate legal entity created for business necessity and had already paid Service Tax on the revenue received. The appellant relied on Circulars by CBEC and DGFT to support their contention that they were not liable to pay Service Tax.

2. The issue of invoking the extended period of limitation for the demand raised in 2010 was crucial. The appellant claimed that the entire revenue received from the subsidiary had already suffered tax, and Circulars mandated that if the main contractor had paid Service Tax, the sub-contractor was not liable. The Tribunal found that there was no intention to evade payment of duty, considering the bonafide belief of the appellant. Consequently, the impugned order was set aside on the ground of limitation, and the appeal was allowed.

3. The classification of services provided by the appellant under "Business Auxiliary Services" was contested. The appellant argued that the services rendered, including provision of office space, personnel/staff, administrative services, and utilities, did not fall under any clause of the definition of "Business Auxiliary Services." The Tribunal considered the nature of services provided and the absence of a precise charge in the show-cause notice to conclude that no Service Tax could be demanded.

4. The liability of the appellant and their subsidiary to pay Service Tax was debated. The Revenue argued that the subsidiary pays part of its revenue to the appellant, and the services provided by the appellant were beyond mere infrastructural support. The Revenue relied on legal precedents to support their contention that sub-contractors were liable to pay Service Tax, even if the main contractor had already paid. Additionally, the appellant's failure to mention certain services in their ST-3 return was highlighted by the Revenue.

In conclusion, the Tribunal's decision was based on the grounds of limitation, bonafide belief, and the interpretation of Circulars regarding Service Tax liability in subcontracting scenarios. The judgment provided clarity on the issues raised and resolved the dispute in favor of the appellant.

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