2024 (9) TMI 698 - AT - Service Tax

Classification of services - Business Auxiliary Service or under Tour Operator Service? - Appellant is engaged in multi-level sales promotion activities and has entered into contracts with various corporate clients whereby it sold vouchers in the form of gift, free holiday and free airline ticket to corporate clients against a consideration - interest and penalty - Extended period of limitation. HELD THAT - In the present case, the Appellant has entered into contracts with various corporate clients whereby it sold vouchers in the form of gift, free holiday and free airline ticket to corporate clients against a consideration and on that consideration, it is discharging the service tax liability under the head Tour Operator after availing abatement under N/N. 1/2006-ST dt. 01.03.2006 amended vide Notification No. 38/2007-ST dt. 23.08.2007. It is found that in the impugned order, the demand has been confirmed under the head Business Auxiliary Service for providing vouchers to the customers of corporate clients on their behalf, but for complying under the said clause, the service provider should render the services to the third party which would ordinarily be rendered by the client i.e. the service provider steps into the shoes of the client; whereas, in the instant case, the corporate clients are engaged in manufacture, sale and trading of goods and not engaged in providing Tour Operator Service i.e. in the business of planning, scheduling, organizing or arranging tours, therefore, it cannot be said that the Appellant is providing Tour Operator Service on behalf of the corporate clients when the corporate clients itself are not Tour Operators. The corporate clients were immune from all costs, actions, claims, suits, proceeding etc and hence, the corporate clients were not responsible for the services provided by the Appellant to the customers. Further, the customers of corporate clients are not bound to avail the benefits under vouchers by virtue of the agreement between the Appellant and the corporate clients. Consensus-ad-idem is required between the Appellant and the customers - the Appellant directly provided the services to the customers without any intervention of the corporate clients and the Appellant is rendering the services under the head of Tour Operator and has correctly availed the abatement under the N/N. 1/2006-ST dt. 01.03.2006 amended vide 38/2007-ST dt. 23.08.2007 after fulfilling the conditions as prescribed in these notifications. Extended period of limitation - HELD THAT - The show cause notice invoking extended period of limitation has been issued solely on the basis of audit report without further investigation into the matter. It has been consistently held by the Courts that for invoking the extended period of limitation, intention to evade tax should be established, whereas in the present case, the Appellant has been regularly filing ST-3 returns wherein the abatement availed by the Appellant is duly declared and the department was well aware about the Appellant s activities; therefore, extended period of limitation cannot be invoked. In terms of the proviso to Section 73(1) of the Act, the extended period of limitation is applicable only in cases where service tax has not been levied/paid or has been short levied/short paid or erroneously refunded by reason of fraud or collusion or wilful ms-statement or suppression of facts or contravention of any provisions of the Act or the Rules made thereunder with an intent to evade payment of service tax. Interest and penalty - HELD THAT - The question of interest and penalty does not arise because the demand of service tax itself is not sustainable. The impugned order is not sustainable in law and is liable to be set aside - Appeal allowed.

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Eligibility for abatement under Notification No. 1/2006-ST.
3. Invocation of the extended period of limitation.
4. Imposition of interest and penalties.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The primary dispute is whether the appellant's services fall under 'Tour Operator Service' as per Section 65(115) of the Finance Act, 1994, or 'Business Auxiliary Service' under Section 65(19) read with Section 65(105)(zzb) of the Act. The appellant argued that it directly provided tour operator services to customers without any principal-agent relationship with corporate clients. The tribunal found that the appellant sold vouchers to corporate clients and directly provided services to customers, indicating the absence of a principal-agent relationship. The tribunal concluded that the appellant's services were correctly classified under 'Tour Operator Service' and not 'Business Auxiliary Service.'

2. Eligibility for Abatement under Notification No. 1/2006-ST:
The appellant claimed abatement under Notification No. 1/2006-ST, amended by Notification No. 38/2007-ST, while discharging service tax liability. The tribunal agreed with the appellant, noting that the appellant fulfilled the conditions for abatement as it provided services directly to customers and not on behalf of corporate clients. The tribunal upheld the appellant's eligibility for abatement under the specified notifications.

3. Invocation of the Extended Period of Limitation:
The demand pertained to the period 2005-2006 to 2007-2008, but the show cause notice was issued on 13.04.2011, invoking the extended period of limitation. The tribunal emphasized that the extended period could only be invoked in cases of fraud, collusion, willful misstatement, or suppression of facts with intent to evade tax. The tribunal found no evidence of such intent, as the appellant regularly filed ST-3 returns and the department was aware of the appellant's activities. Consequently, the tribunal held that the invocation of the extended period was not justified.

4. Imposition of Interest and Penalties:
Given that the demand for service tax itself was found unsustainable, the tribunal ruled that the imposition of interest and penalties was not warranted. The tribunal set aside the impugned order, allowing the appeal with consequential relief.

Conclusion:
The tribunal concluded that the appellant's services were correctly classified under 'Tour Operator Service,' and the appellant was eligible for abatement under the relevant notifications. The invocation of the extended period of limitation was deemed unjustified, and the imposition of interest and penalties was ruled out. The impugned order was set aside, and the appeal was allowed with consequential relief.