2008 (3) TMI 60 - AT - Service Tax

Appellants promoting marketing of car loans for which they receive a commission from such banks - liable to Tax as business auxiliary service - appellants contention that business auxiliary services provided by a commission agent were exempt Not. 13/03 is not acceptable - Not 13/03 had an explanation which exempts only such commission agents who cause sale or purchase of goods not for sale or purchase of services like car loans - demand is justified but penalty set aside for bonafide belief

Summary

Issues:
1. Tax liability on services provided to banks for promoting car loans.
2. Applicability of Notification No. 13/03-S.T. for exemption.
3. Imposition of penalty under Section 76 of the Finance Act, 1994.

Analysis:
1. The Appellants provided space and facilities to banks for promoting car loans, receiving a commission, leading to a tax liability under business auxiliary service as per Board's Circular No. 87/05/2006-S.T. The Appellants contended exemption under Notification No. 13/03-S.T. for commission agents, but the Tribunal clarified that the exemption was limited to agents causing sale or purchase of goods, not services like car loans. Thus, the tax demand and interest were deemed valid.

2. The Appellants believed they were exempt under Notification No. 13/03-S.T. due to their role as car dealers arranging loans, but the Tribunal found the exemption inapplicable as it pertained to goods, not services. Despite the reasonable assumption by the Appellants, the Tribunal upheld the tax demand and interest, as the exemption did not cover services related to car loans, leading to a valid imposition of tax liability.

3. Regarding the penalty under Section 76 of the Finance Act, 1994, the Tribunal invoked Section 80, which states no penalty if the assessee proves a reasonable cause for the failure. The Appellants' payment of the tax before the show cause notice demonstrated their bona fide intention, leading the Tribunal to set aside the penalty while upholding the duty and interest demands. The appeal was partly allowed, and the stay petition was disposed of, emphasizing the importance of proving a reasonable cause for any failure to avoid penalties.