2018 (10) TMI 323 - AT - Service Tax

Business Auxiliary Service - business of booking space and collection of freight for M/s. British Airways World Cargo and providing visa services to the applicants - ground handling agency services - Circular No.137/06/2011-ST dated 20.4.2001 issued by CBEC - export of services or not - penalty. Held that - The services rendered by the appellants insofar as visa services are concerned are squarely covered by the clarification issued by CBEC vide the Circular No.137/06/2011-ST dated 20.4.2001 issued by CBEC vide File No.332/2011/2010-TRU wherein it was clarified that similar activities undertaken with reference to visa service are not liable to service tax - the demand as far as visa services rendered by the appellants are concerned does not sustain. Ground handling agency services - BAS services - Case of appellant is that the services are in the nature of export and therefore, in terms of Rule 3(3) of Export of Service Rules, 2005, the services are exempt - Held that - On being questioned, the learned counsel could not specifically reply as to whether such services are rendered only with reference to the export cargo or otherwise. He submitted that necessary details are contained in the agreements and he was not in a position to submit the agreements readily - for determination of the liability of service tax of the appellant vis- -vis the contracts and the actual nature of the work undertaken by the appellants so as to evaluate whether they can be termed as export of services, the matter is remanded. Increase in quantum of Penalty u/s 76 by subsequent issuance of SCN - Held that - The learned Commissioner has clearly erred in taking a step which amounts to review of his own order. The Department was well within its rights to file an appeal before the appropriate form if it was felt that there was an error in the order - the subsequent order being issued without authority of law is liable to be set aside. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Whether the appellants are liable to pay service tax for Business Auxiliary Service as alleged by the Department.
2. Whether the visa services provided by the appellants are taxable under Section 65(105) of the Finance Act, 1994.
3. Whether the penalty increase from &8377; 100/- per day to &8377; 200/- per day in the show-cause notice dated 14.7.2008 is valid.

Analysis:

Issue 1: Business Auxiliary Service Tax Liability
The Department alleged that the appellants were providing Business Auxiliary Service under Section 65(19) of the Finance Act, 1994. The appellants argued that the activities related to visa services are sovereign functions of the country and should not be considered as taxable services. They referred to Circular No.137/06/2011-ST and various tribunal cases to support their claim that visa facilitation services are not taxable under Section 65(105) of the Finance Act, 1994. The Tribunal agreed with the appellants, stating that the visa services provided by them are not taxable under the relevant section.

Issue 2: Taxability of Visa Services
The appellants contended that the visa services they provide are not taxable under Section 65(105) of the Finance Act, 1994, citing relevant circulars and tribunal decisions. The Tribunal upheld the appellants' argument and set aside the demand related to visa services.

Issue 3: Validity of Penalty Increase
The Department sought to increase the penalty under Section 76 from &8377; 100/- per day to &8377; 200/- per day through a show-cause notice. The appellants argued that the Commissioner erred in reviewing his own order without legal authority. The Tribunal agreed with the appellants, stating that the subsequent penalty increase order was issued without legal basis and should be set aside.

Conclusion
The Tribunal ruled in favor of the appellants on the issues related to visa services and penalty increase. The demand concerning visa services was set aside, and the penalty increase order was deemed invalid. However, the issue of tax liability for cargo handling agency services was remanded back to the original authority for further evaluation based on evidence provided by the appellants to determine if the services qualified as exports under Rule 3(3) of the Export of Service Rules, 2005.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT Bangalore highlights the arguments presented by the parties, the legal interpretations made by the Tribunal, and the final decision rendered on each issue involved in the case.