2010 (4) TMI 574 - AT - Service Tax

Business auxiliary service - appellants leased out buses for transporting passengers under a contract - appellant would be supplying the buses along with driver who doubled also as a conductor when required - provision of service on behalf of the client - activity involved was renting out the buses - while the appellant retained the actual possession and control of the buses - appellant rendered service to the general public on behalf of client Held that - appellants had not apparently provided any service on behalf of client by leasing out buses to it under a contract. In the circumstances we order waiver of pre-deposit of the dues adjudged against the appellants and stay recovery thereof pending decision in the appeal.

Summary

Issues:
1. Demand of service tax for 'business auxiliary service' rendered by appellants.
2. Applicability of interest and penalty under section 78 of the Finance Act, 1994.
3. Interpretation of the activity involved as 'supply of tangible goods' or 'business auxiliary service'.
4. Application for waiver of pre-deposit and stay on recovery pending appeal decision.

Analysis:

Issue 1: The Commissioner (Appeals) affirmed the demand of service tax against the appellants for the years 2005-06 and 2006-07 for 'business auxiliary service' rendered by them. The service tax was found due towards the provision of service on behalf of the client, as per section 65(19)(vi) of the Act.

Issue 2: The impugned order also confirmed the imposition of interest and penalty equal to twice the demanded amounts under section 78 of the Finance Act, 1994. The penalty was imposed in addition to the confirmed demands for the respective years.

Issue 3: The appellants leased out buses to Andhra Pradesh State Road Transport Corporation (APSRTC) for transporting passengers, where the appellant retained possession and control of the buses. The question arose whether this activity constituted 'business auxiliary service' or 'supply of tangible goods'. The Tribunal observed that the activity involved was more aligned with the supply of tangible goods, which became taxable after a specific date.

Issue 4: The appellants moved an application for waiver of pre-deposit, contending that they did not provide any service on behalf of APSRTC by leasing out buses. The Tribunal, after reviewing submissions, ordered the waiver of pre-deposit of the dues adjudged against the appellants and stayed the recovery pending the final decision in the appeal. This decision was based on the prima facie determination that the activity was supply of tangible goods rather than business auxiliary service.