2020 (6) TMI 122 - AT - Service Tax

Classification of services - Business Auxiliary Services or not - activity undertaken by the appellants was to capture the data and photograph of applicants for the driving licences as well as learning licences and to prepare a smart card/paper licence and to submit to the RTO for further issuance to the applicant - CBEC vide Circular No. 89/7/2006-ST dated 18/12/2006 - HELD THAT - The appellants are only assisting a statutory authority in the discharge of statutory functions and by no stretch of imagination they are rendering any Business Auxiliary Service to the Road Transport Authorities. From the facts of the case, it is apparent that the Road Transport Authority has outsourced part of their work to the appellant and thereby the appellants have in fact assisted the statutory functions of the authorities and have not in any case supported any business activity. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the services provided by the appellant fall under the category of 'Business Auxiliary Services' as defined under Section 65 (19) (vi) of Finance Act, 1994, and are liable for service tax.

Analysis:
The appellants were awarded a contract by the Government of Maharashtra to set up computerized facilities for issuing Smart Car Driving Licences and paper learning licences. The services involved capturing data and photographs of applicants, preparing smart cards/paper licences, and submitting them to the Road Transport Office. The Revenue contended that these services fell under 'Business Auxiliary Services' and demanded service tax. The appellant argued that the services were covered by judicial decisions and CBEC circular exempting activities performed by sovereign/public authorities under statutory obligations from service tax.

The Circular issued by CBEC clarified that activities performed by sovereign/public authorities under statutory obligations, with fees collected as compulsory levy, are not taxable services. The Tribunal referred to the case of Smart Chip Limited, where it was observed that building a system does not constitute 'Business Auxiliary Service.' The Tribunal emphasized that the appellants were assisting a statutory authority in discharging statutory functions and not engaged in business activities. The appellants were found to have supported the statutory functions of the authorities and not provided Business Auxiliary Services.

In conclusion, the Tribunal held that the appellants were not rendering Business Auxiliary Services to the Road Transport Authorities but were assisting in statutory functions. The appeal was allowed based on the judicial pronouncements and the exemption provided for activities performed by sovereign/public authorities under statutory obligations. The decision was made in favor of the appellant, granting consequential relief as per the law.