2008 (1) TMI 110 - AT - Service Tax

Activity of collecting telephone bills from customers & making them deposit in account of telephone service provider receiving commission for such services impugned activity is cash management service, revenue can t bring that activity under any category of customer care services or business auxiliary service impugned activity is that of banking & other financial services and in that category, the activity of cash management is excluded during relevant time demand & penalty set aside

Summary

Issues Involved:
1. Classification of services provided by the appellant under "Business Auxiliary Services" or "Banking and Other Financial Services".
2. Applicability of service tax and penalties under Section 76 and 77 of the Finance Act, 1994.

Detailed Analysis:

1. Classification of Services:
The primary issue revolves around whether the appellant's activity of collecting telephone bills on behalf of BSNL falls under "Business Auxiliary Services" or "Banking and Other Financial Services". The appellants argued that their activity is a normal banking service, not a customer care service, and should be classified under "Banking and Other Financial Services" which excludes cash management. The Commissioner (Appeals) found that the appellant's activity of collecting bills constitutes a "customer care service" on behalf of BSNL and falls under "Business Auxiliary Services" as defined in Section 65(19) (iii), (vi), and (vii) of the Finance Act, 1994.

2. Applicability of Service Tax and Penalties:
The Commissioner (Appeals) upheld the demand for service tax, stating that the appellant failed to pay the service tax in time and did not get the services endorsed in their Registration Certificate, thus justifying the imposition of penalties under Sections 76 and 77.

Judgment Analysis:
The tribunal examined the definitions of "Business Auxiliary Services" and "Banking and Other Financial Services" under Sections 65(19) and 65(12) respectively. The tribunal noted that the activity of collecting bills does not promote or market the sale of goods or services provided by BSNL, which is a prerequisite for classification under "Business Auxiliary Services". The tribunal emphasized that the appellant's activity is more akin to cash management, which is explicitly excluded from "Banking and Other Financial Services".

The tribunal referred to several judgments to support its analysis:
- Bellary Computers v. CCE, Mangalore: Distinguished on the grounds that it involved software and hardware for revenue management, not applicable to the present case.
- Corporate Debt Management Services v. CCE & ST, Coimbatore: Involved recovery agents, distinguishable from the appellant's banking activities.
- Focussed Corporate Services (I) P Ltd. v. CCE(ST): Involved marketing of loans and credit cards, not applicable to the appellant's case.
- Bridgestone Financial Services v. CST, Bangalore: Involved promotion of services, distinguishable from the appellant's banking activities.

The tribunal also referred to the judgment in Dr. Lal Path Lab Pvt. Ltd. v. CCE, Ludhiana, where it was established that a service specifically excluded under one heading cannot be taxed under another general heading. The tribunal concluded that the appellant's activity of cash management is excluded from "Banking and Other Financial Services" and does not fall under "Business Auxiliary Services".

Conclusion:
The tribunal set aside the impugned orders, ruling that the appellant's activity is not covered under "Business Auxiliary Services" and thus, the demand for service tax and penalties under Sections 76 and 77 is not justified. The appeals were allowed, and the orders were pronounced and dictated in open court.