2009 (3) TMI 297 - AT - Service Tax

Appellant had rendered computerized data processing for billing and accounts management service Revenue alleging that the services rendered by the appellant will fall under the category of business auxiliary services - The appellants have clearly shown that during the relevant period, the services would come within the category of information technology service and they would be specifically excluded from the scope of business auxiliary service by way of explanation to Section 65(19). In the impugned order, there is not discussion on the plea made by the appellant but only a bald statement that the said service comes under business auxiliary service has been made - It was also submitted that activities of spot billing and account management will not fall under the sub-clauses (i) or (vii) or (iii) or (vi) of the definition of Business Auxiliary Service services rendered directly to client and not on behalf of the client as agents, therefore in terms of the Board s Clarification dated 28-2-2006, the services rendered of outsourcing of spot billing work would come within the ambit of business support service which is liable to service tax only with effect from 2006. - The appellant has made out a very strong case to show that the services rendered by them would not fall within the category of business auxiliary service during the relevant period. appeal is allowed

Issues Involved:
1. Classification of services rendered by the appellant.
2. Applicability of service tax on the services rendered during the relevant period.
3. Invocation of the extended period of limitation.
4. Imposition of interest and penalties.

Detailed Analysis:

1. Classification of Services Rendered by the Appellant:
The appellant, a partnership firm in chartered accountancy, provided computerized data processing for billing and accounts management services under an agreement with APCPDCL. The Revenue issued a show cause notice alleging that these services fall under "business auxiliary services" and proposed service tax along with penalties. The appellant argued that their services are "information technology services" exempt from service tax as per the definition in Section 65(19) of the Finance Act, 1994. The Commissioner (Appeals) upheld the Original Authority's order, stating that the services were in connection with the business activities of APCPDCL and not merely information technology services.

2. Applicability of Service Tax on the Services Rendered During the Relevant Period:
The appellant contended that their services, being computerized data processing, fall under the category of information technology services, which were exempt from service tax until 1-5-2006. They cited previous CESTAT decisions (Bellary Computers and Dataware Computers) supporting their claim that such services do not fall under business auxiliary services. The Tribunal agreed, noting that the services provided by the appellant were directly to APCPDCL and not on behalf of APCPDCL, thus falling under information technology services and not business auxiliary services.

3. Invocation of the Extended Period of Limitation:
The appellant argued against the invocation of the extended period of limitation, asserting there was no suppression of facts with intent to evade tax. They claimed a bona fide belief that their services were not taxable until 1-5-2006. The Tribunal found merit in this argument, noting that the appellant had a strong case showing their services did not fall under business auxiliary services during the relevant period.

4. Imposition of Interest and Penalties:
The show cause notice had proposed penalties under Sections 75A, 76, 77, and 78. The appellant contended that no interest or penalties should be imposed as they were under a bona fide belief that their services were non-taxable. The Tribunal, agreeing with the appellant's classification of services and the absence of intent to evade tax, set aside the penalties.

Conclusion:
The Tribunal concluded that the services rendered by the appellant were indeed information technology services, exempt from service tax during the relevant period. The invocation of the extended period of limitation was unjustified, and the imposition of penalties was unwarranted. The appeal was allowed with consequential relief, setting aside the impugned order.

← Previous Next →