2018 (9) TMI 1211 - AT - Service Tax

Business Auxiliary Service or not - providing service on behalf of the principle of Information Technology Service - Held that - On going through the agreement between eBIZ and the assessees, the activity undertaken by the assessees involved the promotion or marketing of the service of eBIZ and getting commission from the eBIZ of the same as the service provided by the assessees in relation to the operation of computer systems. In that circumstances, the assessees are covered by the explanation to Section 65(19) of the Finance Act, 1994, therefore, they are not liable to pay service tax. As the assessees are providing service in respect of operation of computer systems, the same is not covered under Business Auxiliary Service, therefore, they are not liable to pay service tax. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Business Auxiliary Service under Section 65(19) of the Finance Act, 1994.

Analysis:
The case involved an appeal against the demand of service tax under the category of Business Auxiliary Service. The assessee was working as a Gold Deplomat Associate of a company and selling products/packages related to computer systems. A show cause notice was issued, and after adjudication, service tax demand along with penalties was confirmed. The matter was appealed before the Ld. Commissioner, who dropped the penalty but confirmed the rest of the orders. Both parties appealed against the respective decisions. The assessee claimed that their activity was exempt as Information Technology Service under Section 65(19) of the Finance Act, 1994, and not Business Auxiliary Service. The Tribunal had earlier dismissed the appeals, but the High Court remanded the matter back for reconsideration.

The assessee argued that their services fell under Information Technology Service as per the explanation added to Section 65(19) of the Finance Act, 1994. The Tribunal examined the services provided by the assessee, which were related to providing services on behalf of the principle of Information Technology Service. The commission received by the assessee was sought to be taxed as Business Auxiliary Service under Section 65(19) of the Finance Act, 1994. The Tribunal reproduced the relevant provisions of the Act to better understand the scope of Business Auxiliary Service.

After careful consideration, the Tribunal found that the activity undertaken by the assessee, as per the agreement with the company, involved the promotion and marketing of computer system services, for which they received a commission. Based on the explanation to Section 65(19) of the Finance Act, 1994, the Tribunal concluded that the assessee's services were related to the operation of computer systems and thus fell under Information Technology Service, exempt from Business Auxiliary Service. Consequently, the Tribunal set aside the orders confirming the demand for service tax, interest, and penalties.

In conclusion, the Tribunal allowed the appeals filed by the assessee, dismissing the appeals filed by the Revenue. The decision highlighted the distinction between Business Auxiliary Service and Information Technology Service under the Finance Act, 1994, ultimately ruling in favor of the assessee based on the nature of the services provided.