2019 (5) TMI 1146 - AT - Service Tax

Demand of service tax - brokerage received on IPO related service - demand set aside on the ground that the appellant is not covered by the definition as shares will become goods only if allotment was made - Scope of 'Business Auxiliary Services' as per Section 65(19) of the Finance Act, 1994 - scope of SCN - HELD THAT - The appellant s activity is not covered by subsection (i) as they are not promoting or marketing or selling any goods. It is only an initial / offer and until the rights are issued to the subscribers such as share certificate do not assume the character of goods. Therefore, as rightly held by the lower authority, the services of the appellant to their client are beyond the scope of sub-section (i) - Coming to the sub-section (ii), service rendered by the appellant to their clients would be chargeable to tax only if it is rendered in relation to promotion or marketing of service rendered by the clients. IPO is only an offer to the prospective buyers and therefore, it cannot be held to be a service by the company offering IPO. Therefore, we find that in either condition, the appellants are not covered by the definition under Section 65(19) of the Finance Act, 1994. The Review Order goes beyond the scope of show-cause notice and therefore, is not maintainable under law as held by Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, DELHI-III VERSUS CARRIER AIRCON LTD. 2005 (5) TMI 69 - SUPREME COURT . The appeals survive both on merits as well as on the fact that the Revisionary Authority has traveled beyond the grounds raised in the first show-cause notice - the demand itself is not sustainable and we are not going in to the issue of limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Scope of original show-cause notice in Revision Order under Section 84
2. Applicability of Section 65(19)(ii) of the Finance Act, 1994
3. Taxability of services in relation to Initial Public Offer (IPO)
4. Time-barred show-cause notices and invocation of extended period
5. Interpretation of "Business Auxiliary Service" under Section 65(19) of the Finance Act, 1994
6. Review order exceeding the scope of show-cause notice

Analysis:

Issue 1: Scope of Original Show-Cause Notice in Revision Order under Section 84
The appellant argued that the Revision Order under Section 84 exceeded the scope of the original show-cause notice, citing legal precedents. The Tribunal dismissed the appeals, emphasizing that the principle of law enunciated by the Tribunal was correct, and the Commissioner could not pass orders on points not arising from the subordinate adjudicating authority's decision.

Issue 2: Applicability of Section 65(19)(ii) of the Finance Act, 1994
The appellant contended that Section 65(19)(ii) was inapplicable to the case. The Tribunal found that the appellant's services did not fall under the definition of promoting or marketing services rendered by the client, concluding that the appellants were not covered by this provision.

Issue 3: Taxability of Services in Relation to Initial Public Offer (IPO)
The Tribunal examined whether services related to IPO were taxable under the category of "Registrar to an issue" as defined in various sections of the Finance Act. It was established that the demand was not justifiable, as the tax liability under Business Auxiliary Services was found to be untenable.

Issue 4: Time-Barred Show-Cause Notices and Invocation of Extended Period
The appellant argued that the first show-cause notice was partially time-barred, and the second was wholly time-barred. The Tribunal did not delve into the issue of limitation, as it held the demand itself was not sustainable.

Issue 5: Interpretation of "Business Auxiliary Service" under Section 65(19) of the Finance Act, 1994
The Tribunal analyzed the definition of "Business Auxiliary Service" under Section 65(19) of the Finance Act, 1994, and concluded that the appellant's activities did not align with the subsections of the provision, as they were not promoting or marketing goods or services.

Issue 6: Review Order Exceeding the Scope of Show-Cause Notice
The Tribunal found that the Review Order went beyond the grounds raised in the first show-cause notice, rendering it not maintainable under law. The Tribunal allowed the appeals, stating that the demand was not sustainable, and refrained from addressing the issue of limitation.

In conclusion, the Tribunal allowed both appeals, emphasizing that the demand was not sustainable under the provisions of the Finance Act, 1994, and that the Revisionary Authority had exceeded the grounds raised in the initial show-cause notice.