2018 (9) TMI 319 - AT - Service Tax

Business Auxiliary Services - business of car finance - during the period w.e.f. July 2003 to December 2004, did not make payment of Service Tax - during the course of investigation itself the appellant obtained a service tax registration on 25.10.2004 for Business Auxiliary Service and have since then started paying the service tax - demand of service tax - time limitation. Held that - The nature of activity of the appellant is promotion on marketing of the services provided by the client. The same very much falls under sub Clause (ii) of 65(19) of the Act. The appellants actually were sourcing customers for the above mentioned banks. The actual agencies which provide the financial service by giving loans are those banks. They are actually the clients of the appellants. Thus, the services of the appellants were very much that in the nature of Business Auxiliary Services. Time limitation - Held that - It is an admitted and apparent fact that since 01.07.2003, the appellant has not discharged the liability. They only got themselves registered under Business Auxiliary Services on 25.10.2004 but the simultaneous fact remains that during the said period (since 01.07.2003 to 10.09.2004), there was a prevalent confusion about the nature of the impugned activities - In the present case also, the demand is for the period w.e.f. July 2003 to December 2004. The Show Cause Notice was issued on 31.07.2007. Once there was an apparent acknowledged confusion about the impugned activity, nondischarge of the liability thereof cannot be alleged as an act of suppression of fact with an intent to evade tax. Resultantly, the Department was not entitled to invoke the extended period of limitation - demand is barred by limitation of time. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Applicability of service tax on car loan marketing services rendered by the appellant.
2. Allegations of suppression and evasion of tax by the appellant.
3. Invocation of extended period of limitation by the Department.
4. Interpretation of Business Auxiliary Services under Section 65(19) of the Finance Act.
5. Impact of Circular No. 87/05/2006-ST on the tax liability of the appellant.
6. Consideration of case laws and precedents in determining the liability of the appellant.

Analysis:
1. The appellant acted as a car loan marketing agent for banks, rendering car finance services. The Department alleged non-payment of service tax on commissions received from banks during July 2003 to December 2004. The appellant obtained service tax registration later but was accused of not discharging a tax liability of ?20,75,821. The lower authorities confirmed the demand, leading to the current appeal.

2. The appellant argued that ambiguity existed regarding service tax applicability until a clarificatory Circular in November 2006. They claimed a bona fide belief in non-liability pre-2003 due to the evolving tax regime. The Department's suppression allegations were contested, asserting the demand was time-barred beyond one year.

3. The Department invoked the extended limitation period, justifying the demand based on the nature of services provided by the appellant. They contended that non-payment constituted tax evasion, warranting confirmation of the demand.

4. The Tribunal analyzed the appellant's business model, concluding their activities fell under Business Auxiliary Services as per Section 65(19) of the Act. The appellant's role in sourcing customers for banks qualified as promotion or marketing services, aligning with the definition.

5. The Circular of November 2006 clarified doubts regarding the tax treatment of similar activities. The Tribunal noted the confusion prevailing during the relevant period, emphasizing the demand's limitation period as a crucial factor in determining the appellant's liability.

6. Citing relevant case laws like Maheshwari Bajaj and others, the Tribunal held that the demand for the period in question was time-barred due to acknowledged confusion and lack of suppression by the appellant. The Orders of the lower authorities were set aside, and the appeal was allowed based on the limitation issue.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, and the Tribunal's reasoning in arriving at the decision to set aside the demand based on the limitation period.