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2023 (5) TMI 656 - AT - Service TaxLevy of service tax - business auxiliary service - invocation of extended period of limitation contemplated under section 73(1) of the Finance Act, 1994 - penalty - HELD THAT - The issue decided in the case of M/S TEAM HR SERVICES LTD. VERSUS CST, DELHI 2018 (2) TMI 1680 - CESTAT NEW DELHI where it was held that we have no doubt that the appellant did market the services provided by the client bank. It will not be correct to state that the appellant only provided operational assistance in such marketing. No such words were used in the terms of the agreement and in fact the agreement directly refers to the appellant as a service provider to mark its products (ICICI Bank) and the appellants are in fact engaged in promotion and marketing activity of the financial products of the client bank. The aforesaid decision of the Tribunal was confirmed by the Delhi High Court in the appeal filed by the Department in COMMISSIONER OF CENTRAL TAX GST DELHI EAST VERSUS TEAM HR SERVICES LTD. 2018 (10) TMI 406 - DELHI HIGH COURT . The observations made by the Delhi High Court dismissing the appeal filed by the Department against that part of the order of the Tribunal holding that the extended period of limitation could not have been invoked. In view of the aforesaid decision of the Tribunal and the Delhi High Court, it has to be held that extended period of limitation could not have been invoked. As the entire demand is for the extended period of limitation, the order passed by the Commissioner holding that the extended period of limitation was correctly invoked deserves to be set aside and is set aside. The imposition of penalty also deserves to be set aside and is set aside. Appeal allowed.
Issues involved: Confirmation of demand of service tax with interest and penalty, invocation of extended period of limitation, interpretation of agreement for service provision, distinction between business auxiliary service (BAS) and business support service (BSS), applicability of penalty for non-payment of tax and non-filing of returns.
Confirmation of demand of service tax with interest and penalty: The order dated 30.03.2022 passed by the Commissioner confirmed the demand of service tax under the category of 'business auxiliary service' (BAS) for the period April, 2005 to March, 2007. The show cause notice invoked the extended period of limitation under section 73(1) of the Finance Act, 1994. The Commissioner held that the extended period of limitation was correctly invoked based on the facts and circumstances of the case. Invocation of extended period of limitation: The appellant contended that the entire demand raised in the show cause notice was beyond the extended period of limitation. Referring to a previous show cause notice for the period from 01.07.2003 to 31.03.2005, the appellant argued that the order passed by the Commissioner should be set aside as the demand was beyond the extended period of limitation. Interpretation of agreement for service provision: The Tribunal analyzed the agreement between the appellant and ICICI Bank, noting that the appellant was engaged in marketing the financial products of the client bank. The Tribunal emphasized that the appellant's activities fell under the definition of 'business auxiliary service' as they were involved in the promotion and marketing of services provided by the client bank. Distinction between business auxiliary service (BAS) and business support service (BSS): The Tribunal addressed the distinction between BAS and BSS, highlighting that the appellant's services were focused on marketing rather than simple operational assistance for marketing. The Tribunal concluded that the appellant's activities aligned with BAS and not BSS, leading to the dismissal of tax liability and penalties under BAS. Applicability of penalty for non-payment of tax and non-filing of returns: The Tribunal considered the issue of penalties in light of the appellant's tax liability and filing history. The Tribunal set aside the penalties imposed by the Original Authority, emphasizing that the appellant's case did not warrant tax liability and penalties under the proviso to Section 73(1) of the Act. Separate Judgement: The decision of the Tribunal regarding the invocation of the extended period of limitation was upheld by the Delhi High Court. The High Court dismissed the appeal filed by the Department, affirming that the extended period of limitation could not have been invoked based on the circumstances of the case. In conclusion, the order passed by the Commissioner confirming the demand of service tax with interest and penalty was set aside as the extended period of limitation was held to be incorrectly invoked. The Tribunal's interpretation of the agreement and distinction between BAS and BSS supported the appellant's case, leading to the allowance of the appeal on the grounds of limitation and penalties.
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