2018 (7) TMI 1220 - AT - Service Tax

Business Auxiliary Service - respondents had tie up with various financial institutions like GE Countrywide, TVS Finance etc. for purchase of consumer durables from the show rooms; that in respect of customers who avail the loan facility from such financial institutions, the respondents receive incentives depending on the quantum of business provided through them - whether the service would fall under the category of Business Auxiliary Services or not? Held that - To determine whether a particular activity would constitute Business Auxiliary Service , the Larger Bench in the case of M/S PAGARIYA AUTO CENTER VERSUS CCE, AURANGABAD 2014 (2) TMI 98 - CESTAT NEW DELHI (LB) , has held that transactional documents and other evidence on record should indicate that the substantial activity is falling within the contours of BAS - In the case before us, these tests have not been applied - Interests of justice require that the matter should be remanded for de novo consideration by the original authority to apply the tests laid down by the Larger Bench of the Tribunal - matter on remand - In such de novo proceedings, the adjudicating authority shall also look into the contention of the respondents that the proceedings per se are hit by limitation. Penalties u/s 77 and 78 - Held that - The penalties are not warranted and is set aside. Appeal allowed by way of remand.

Summary

Issues:
1. Whether the services provided by the respondents fall under "Business Auxiliary Service" as per the Finance Act, 1994?
2. Whether penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994 are justified?

Analysis:

Issue 1:
The case involves determining whether the services provided by the respondents constitute "Business Auxiliary Service" as defined under Section 65(19) of the Finance Act, 1994. The Directorate General of Central Excise Intelligence (DGCEI) alleged that the respondents were acting as agents for financial institutions and receiving incentives for promoting their business. The show cause notice proposed a service tax liability, interest, and penalties. The original authority confirmed the tax demand and imposed penalties, which were later set aside by the Commissioner (Appeals). The Revenue appealed the decision.

The Revenue argued that the respondents directed customers to specific financial institutions with tie-ups, and the respondents received incentives for promoting the institutions' business. The respondents contended that merely providing space to financial institutions in their showrooms did not constitute "Business Auxiliary Service." They highlighted the lack of reliance on transactional documents by the authorities and raised a limitation issue regarding the timing of the show cause notice.

The Tribunal noted that the authorities did not analyze the transactional documents and evidence thoroughly. Following the principle of stare decisis, the Tribunal relied on the Larger Bench decision in Pagariya Auto Center case. The Tribunal emphasized that each case must be analyzed to determine if the activities fall within the definition of "Business Auxiliary Service." Due to the lack of application of the tests laid down by the Larger Bench, the matter was remanded for de novo consideration by the original authority.

Issue 2:
Regarding penalties under Sections 76, 77, and 78 of the Finance Act, 1994, the Tribunal considered the consistent approach in various Tribunal decisions following the Pagariya Auto Center case. These decisions set aside penalties while upholding tax liability with interest. The Tribunal cited examples where penalties were not imposed based on a bonafide belief or time-barred demands. In line with this precedent, the Tribunal set aside the penalties imposed on the respondents in this case.

In conclusion, the Tribunal allowed the appeal by remanding the matter for fresh consideration by the original authority, applying the tests from the Pagariya Auto Center case. The Tribunal also set aside the penalties imposed under Sections 77 and 78 of the Finance Act, 1994. The decision was pronounced on 18.07.2018.