2009 (7) TMI 699 - AT - Service Tax

Stay- Dispensation of pre deposit- Business Auxiliary Service- The Appellant submits that show-cause notice has not raised the classification issue, proper law should be applied to determine nature of activity carried out by the Appellant and appropriate classification of service may be made for proper taxation. Held that- the Appellant deserves interim protection without being directed for making pre-deposit of Rs. 2,52,17,830/- toward service tax which otherwise would cause public mischief. Noticing the feature of the impugned order as aforesaid and the manner how natural justice has been violated, direct that there shall be no pre-deposit during pendency of Appeal.

Summary

Issues: Valuation of taxable service, classification of service, time-barred demand, reimbursement of expenditure, classification aspect, gross value determination, interim protection without pre-deposit

In this case, the main issue revolves around the valuation and classification of the taxable service provided by the Appellant. The Appellant initially registered under the category of Event Management Service in 2002 but later argued that their activities should be classified under Business Support Service and Man Power Recruitment Service from 2006 onwards. The Appellant contended that the service provided was not solely Event Management Service due to its multiple nature. The Appellant also raised concerns regarding the proper application of law to determine the nature of their activities for appropriate taxation.

Another significant issue raised was the contention that the entire demand was time-barred as the audit was conducted in 2006, but the show-cause notice was issued in 2008. The Appellant argued that the delay in issuing the notice rendered the demand time-barred. On the other hand, the Respondent argued that the Appellant's liability to tax was clear from the audit findings and that the proceeding fell within the limitation period.

Furthermore, the dispute extended to the inclusion of reimbursed expenses in the gross value of the service provided. The Appellant argued that reimbursement of expenditure should not be subject to service tax as it goes beyond the purview of the law. The issue of gross value determination, particularly in relation to reimbursed expenses, was highlighted, pending a decision from a Larger Bench in a related case.

Regarding the classification aspect, the Appellant emphasized the need for a detailed examination of their activities to determine the appropriate classification for taxation purposes. The Appellant raised concerns about the lack of a comprehensive and reasoned order from the Authority, urging for a more thorough analysis of the various activities undertaken.

In light of the multiple contentions raised by both sides, the Tribunal decided to grant interim protection to the Appellant by directing that no pre-deposit of the substantial amount demanded as service tax be made during the pendency of the Appeal. The Tribunal expressed concerns about the potential public harm that could result from such a pre-deposit and noted the violation of natural justice in the impugned order. The Tribunal refrained from expressing any final opinion on the various issues raised, awaiting further developments in the appeal hearing.