2018 (10) TMI 1476 - AT - Service Tax

Business Support service - appellants being the authorized agents of the MCD for collection of toll - demand of Service Tax - scope of SCN - Time limitation - Held that - Municipal Corporation of Delhi is a statutory body which is allowed by law to levy certain duties and taxes, toll tax being the one such levy. Seeing from this angle, the function of collecting toll tax is a function sovereign in nature. Hence the activity being done by MCD itself or being delegated to be done by someone else authorized in this respect, the activity still retains the character of it being sovereign in nature. Therefore the element of any Business or commerce cannot be attributed to such an activity - Once this is the finding which is otherwise correct as apparent from record, the question of holding the same as a service i.e. the one meant for any Business or commerce has no sustainability. Scope of SCN - Held that - SCN initially made proposal to demand tax under the category of Business Support Service. The mention of this activity as BAS in the final para of show cause notice is nothing more than a typographical error as the show cause notice is discussing about the features of Business Support Service. The authority below has ignored this aspect rather has confirmed the demand under Business Auxiliary Service - This is the law settled that Adjudicating Authority cannot go beyond the scope of show cause notice. Time Limitation - Held that - The appellant is not liable to service tax for allegedly rendering Business Auxiliary Service to MCD. He accordingly is held to be under bonafide belief of have no tax liability - Department has otherwise failed to point out any positive act of suppression part of the appellant. No question arises for invoking extended period of limitation - The period in dispute herein is w.e.f. 01/04/2008 to 15/07/2010 show cause notice is dated 30/11/2010. Hence some period is beyond limitation. For the period within one year of show cause notice, the demand has already held non-sustainable. The Adjudicating Authority below has committed an error while holding sovereign function of MCD when delegated to appellant as the activity of Business Auxiliary Service on part of the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant providing toll collection services to Municipal Corporation of Delhi (MCD) constitutes Business Auxiliary Services.
2. Whether the appellant's activity can be classified as Business Support Service or Business Auxiliary Service.
3. Whether the demand for service tax on toll collection by the appellant is sustainable.
4. Whether the order under challenge is beyond the scope of the show cause notice.
5. Whether the show cause notice is barred by time.

Analysis:

1. The appellant was contracted by MCD for toll tax collection, leading to a service tax demand for Business Auxiliary Services. The appellant argued that toll collection is a sovereign function of MCD, not a commercial service. The Tribunal agreed, stating that the toll collection activity is sovereign in nature, not business-related, and thus not taxable as Business Auxiliary Service.

2. The appellant contended that the confusion between Business Support Service and Business Auxiliary Service in the show cause notice affected the demand's validity. The Tribunal found that the appellant's toll collection did not qualify as a commission agent's activity and was not liable for Business Auxiliary Service tax.

3. The Tribunal noted that for Business Auxiliary Service tax liability, the service provided must be in relation to the recipient's business. As MCD performs statutory functions, not commercial activities, the toll collection by the appellant did not fall under Business Auxiliary Service. Previous case laws supported this interpretation, leading to the appeal being allowed.

4. The Tribunal held that the order's classification under Business Auxiliary Service, deviating from the show cause notice's initial mention of Business Support Service, was an error. Citing precedent, the Tribunal emphasized that the Adjudicating Authority cannot exceed the show cause notice's scope, leading to the order being set aside.

5. Regarding the time bar issue, the Tribunal found the appellant not liable for service tax on Business Auxiliary Service to MCD. The appellant's belief of no tax liability was considered genuine, and the demand for the period within one year of the show cause notice was deemed non-sustainable. Thus, the Tribunal allowed the appeal, setting aside the order.

This detailed analysis of the judgment clarifies the issues raised, the arguments presented, and the Tribunal's findings, ensuring a comprehensive understanding of the legal aspects involved in the case.