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2018 (6) TMI 1004 - AT - Service TaxTime Limitation - Business Auxiliary Services - appellant are working as Direct Selling Agents (DSA) for marketing of auto loan products of HDFC Bank for which the appellant received commission/incentive to the extent of 5% of the loan amount - N/N. 14/2004-ST dated 10.09.2004 - suppression of facts/malafide intent not present - Held that - There was reasonable confusion about the category of service whether the said service of the appellant falls under Business Auxiliary Services or Business Support Services . The issue has been dealt by Board in the Circular no. 87/05/2006-ST dated 06.11.2006, wherein it was clarified that the service provided by HDFC Bank is classifiable as Business Auxiliary Services and liable to payment of Service Tax - In this undisputed fact it cannot be said that the appellant had any malafide intention or any suppression on their part. The appellant s entire service provided to HDFC Bank and all the transactions are recorded in Books of account of appellant as well as in the Books of HDFC Bank. The demand was raised on the basis of such recorded transaction in Books of account, therefore it cannot be said that the appellant has suppressed any material fact with intention to evade payment of Service Tax. The identical facts regarding the limitation was involved in the case of Addis Marketing 2016 (11) TMI 19 - CESTAT MUMBAI , wherein this Tribunal has categorically held that the extended period of limitation cannot be invoked. In the present case the period involved is 10.07.2003 to 31.03.2006, whereas the show-cause notice was issued on 08.10.2007 i.e. after stipulated normal period of one year, therefore the entire demand is hit by limitation - demand not sustainable on the ground of time bar - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Classification of services provided by the appellant. 2. Applicability of Service Tax on the services rendered. 3. Invocation of extended period of limitation. 4. Inclusion of subvention amount in the gross value of services. 5. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. Issue-wise Detailed Analysis of the Judgment: 1. Classification of Services Provided by the Appellant: The appellant argued that the composite set of activities carried out by them for HDFC Bank’s Auto Finance Scheme, including handling documentation and completing formalities, should not be classified under "Business Auxiliary Services" (BAS). They contended that these activities are integrally connected and should not be dissociated. The Revenue, however, maintained that the services fall under BAS, as clarified by the Board Circular No. 87/05/2006-ST dated 06.11.2006 and supported by various judgments including Brij Motors Pvt. Ltd. Vs. CCE, Kanpur and others. 2. Applicability of Service Tax on the Services Rendered: The appellant claimed that the transfer of funds by HDFC Bank as a loan is a transaction of money and not a provision of service. Therefore, the promotion or marketing of these loans should not be treated as promotion or marketing of services. They also argued that even if the services are considered under BAS, they should be exempted under Notification No. 14/2004-ST dated 10.09.2004, which was applicable to "provision of service on behalf of client." This notification was withdrawn by Notification No. 19/2005-ST dated 07.06.2005, but the appellant claimed they were eligible for the exemption during the relevant period. 3. Invocation of Extended Period of Limitation: The Tribunal found that there was reasonable confusion regarding the classification of the service as either BAS or Business Support Services (BSS). This confusion was clarified only after the Larger Bench decision in Pagariya Auto Center Vs. Commissioner of Central Excise, Aurangabad. Given this context, the Tribunal held that the appellant did not have any malafide intention or suppression of facts. The entire service provided to HDFC Bank was recorded in the appellant's and the bank's books of account. Thus, the extended period of limitation could not be invoked, following the precedent set in Addis Marketing Vs. Commissioner of Central Excise, Mumbai. 4. Inclusion of Subvention Amount in the Gross Value of Services: The appellant argued that the subvention of interest granted by HDFC Bank should not be included in the gross value of their services, as it was not received as a service charge. The adjudicating authority had wrongly added this amount to the gross value. The Tribunal did not provide a specific ruling on this issue due to the decision on the limitation period. 5. Imposition of Penalties under Sections 76, 77, and 78: The appellant contended that there was no deliberate suppression of facts with the intention to evade payment of Service Tax. The adjudicating authority failed to provide evidence of deliberate suppression. Consequently, the Tribunal set aside the penalties, invoking Section 80 of the Finance Act, 1994, which provides for waiver of penalties in cases of reasonable cause. Conclusion: The Tribunal concluded that the demand for Service Tax for the period from July 2003 to March 2005 was time-barred and thus set aside. It ordered the re-quantification of the demand for April and May 2005 and reconsideration of the applicability of Notification No. 14/2004-ST for the demand of ?1,42,114/- related to sales commission. The penalties imposed under Sections 76, 77, and 78 were also set aside. The appeal was partly allowed in these terms.
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