2019 (12) TMI 725 - AT - Service Tax

Business auxiliary services - appellant is a practicing chartered accountant and also providing services, namely, field investigation, collection of payments, recovery of loans etc. to various banks and financial institutions - appellant has paid service tax along with interest before issuance of the show cause notice - Penalty - scope of SCN - HELD THAT - Admittedly in the show cause notice, it has been alleged that after 01.05.2006 the merit classification of the services rendered by the appellant do qualify under Business Support Service, therefore, for the period prior to 01.05.2006, demand of service tax cannot be raised against the appellant under the category of Business Auxiliary Service, therefore, the said demand is set aside. After 01.05.06 it is alleged in the show cause notice that the merit classification of the services in question is under the category of Business Support Service, whereas, the adjudicating authority held that said service do qualify under the Business Auxiliary Services which means the adjudicating authority has gone beyond the scope of the show cause notice, therefore, the adjudication order deserves no merits, hence the same is set aside. Penalty - HELD THAT - The appellant has collected the service tax from their clients and during the impugned period the appellant has collected certain amount as service tax from the service in question from their clients and the same is required to be deposited by the appellant under Section 73(D) of the Finance Act, 1994 - the applicant is directed to deposit whole of the amount collected as service tax from their clients along with interest within 30 days of the receipt of this order - Penalty cannot be imposed. Appeal disposed off.

Summary

Issues:
Appeal against demand of service tax, imposition of penalties, classification under Business Auxiliary Service and Business Support Service, payment of service tax by the appellant, sustainability of show cause notice, correct classification of services, liability of the appellant, applicability of S.R. Kalyanakrishan case, deposit of collected service tax, imposition of penalties.

Analysis:
The appellants challenged the demand of service tax, penalties, and classification under Business Auxiliary Service and Business Support Service. The Revenue alleged that the appellant, a practicing chartered accountant, provided services like field investigation, payment collection, and loan recovery to banks, making them liable for service tax. The show cause notice demanded service tax for various services from 2003 to 2008. The appellants contended that they paid the collected amounts before the notice and disputed the classification under Business Auxiliary Service and Business Support Service. The Revenue argued that the service tax was rightly demanded under both categories as admitted by the appellants during investigation.

The Tribunal noted that the appellant's liability was alleged under Business Auxiliary Service before May 2006 and under Business Support Service after that. Referring to the S.R. Kalyanakrishan case, it held that once a service is classified, it cannot be taxed under another category before that date. As the show cause notice specified the liability under Business Support Service post May 2006, the demand under Business Auxiliary Service for the period before that was set aside. The Tribunal also found that the adjudicating authority incorrectly classified the services under Business Auxiliary Service post May 2006, contrary to the show cause notice, leading to the dismissal of the adjudication order.

The Tribunal directed the appellant to deposit the collected service tax along with interest within 30 days under the Finance Act, 1994. No penalties were imposed considering the circumstances. The appeals were disposed of accordingly. The judgment emphasized the importance of correct classification, adherence to show cause notice allegations, and timely payment of service tax to avoid penalties.