2013 (12) TMI 736 - AT - Service Tax

Demand of service tax - Penalty u/s 78 - Business of issuing meal/gift coupon vouchers - Business Auxiliary Services - Whether meal vouchers issued by the assessee promotes sale of goods and services produced or provided by or belonging to the affiliates - Held that - When a user/employee gets such meal vouchers from his employer (assessee s customer), the user has to look the list of affiliates and thereafter approach one of the affiliates of the assessee to buy goods and services. The user cannot approach any other entity or business establishment but to limit himself to the affiliates of the assessee. - such a scheme/restrictions viz. purchase of vouchers by employer and purchaser of goods and services by employee from affiliates itself promotes the sale of goods and services of the affiliates and therefore meal vouchers of the assessee definitely helps in promoting sale of goods and services of assesses affiliates. Meal voucher cannot be compared with credit/debit cards and cannot be called a payment system which is true for the debit/credit card. Vouchers are definitely not substitute for carrying cash as is the case with credit/debit card. In fact, in real life value of such meal vouchers is limited to two thousand per month per employee - Assessee have not been able to provide any evidence to come to the conclusion that the assessee were having a bonafide belief that they were not required to pay service tax during the period under Business Auxiliary Services. No attempt was made by the assessee to ascertain their tax liability from the department before the investigation started - Decided against the assessee. Classification of service - BSS or BAS - section 65A - Held that - The introduction of new service did not bear any specific pattern or coverage to particularly sector. In Central Excise Tariff as also Customs Tariff, the classification is based upon scientific principle and pattern. Keeping in view the evaluation of various entries in the service tax, it is not unusual to find that a particular activity service may get covered by more than one entry/classification. - since the activities are more specifically covered under Business Auxiliary services as per Sec.65A(2), the same would be covered under Business Auxiliary Services. - the service can not be classified as Business Support service - Decided against the assessee.

Summary

Issues Involved:
1. Whether the meal vouchers issued by the assessee promote the sale of goods and services produced or provided by or belonging to the affiliates.
2. Classification of the service provided by the assessee under Business Auxiliary Services or Business Support Services.
3. Invocation of the extended period of limitation.
4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
5. Revenue's contention regarding the scope of the show-cause notice and the amount of penalty under Section 78 related to Education Cess.

Issue-Wise Detailed Analysis:

1. Promotion of Sale of Goods and Services by Affiliates:
The Tribunal examined whether the meal vouchers issued by the assessee promote the sale of goods and services produced or provided by or belonging to the affiliates. It was found that the user/employee does not purchase the meal vouchers directly; instead, the employer purchases them from the assessee. The user/employee must use these vouchers at the affiliates of the assessee, thereby promoting the sale of goods and services of the affiliates. The Tribunal concluded that the meal vouchers indeed promote the sale of goods and services of the affiliates, thus falling under the definition of Business Auxiliary Service.

2. Classification under Business Auxiliary Services or Business Support Services:
The assessee argued that their services are similar to credit/debit cards and should not be taxed under Business Auxiliary Services prior to 1.5.2006. They contended that since they started paying service tax under Business Support Services from 1.5.2006, their services should not be classified under any pre-existing category before that date. However, the Tribunal held that the meal vouchers are not comparable to credit/debit cards, as the vouchers restrict the user to affiliates of the assessee, unlike the wide acceptance of credit/debit cards. The Tribunal also noted that the assessee's services are not covered under the definition of Business Support Services and are more specifically covered under Business Auxiliary Services as per Section 65A(2) of the Finance Act, 1994.

3. Invocation of Extended Period of Limitation:
The assessee contended that the extended period of limitation should not be invoked as they had taken centralized registration and indicated their business of meal vouchers in the documents. The Tribunal agreed with the Revenue that during the centralized registration process, the officials are not expected to examine the taxability of various services provided by the applicant. It was found that the assessee had suppressed details of their activities in their returns. Therefore, the Tribunal held that the extended period of limitation was correctly invoked.

4. Imposition of Penalties:
The assessee argued that they had a bona fide belief that service tax was not payable and cited various case laws to support their contention. However, the Tribunal found no evidence to conclude that the assessee had a bona fide belief that they were not required to pay service tax. The Tribunal noted that no attempt was made by the assessee to ascertain their tax liability from the department before the investigation started. Consequently, the Tribunal held that penalties under Sections 76, 77, and 78 were imposable.

5. Revenue's Contention on Scope of Show-Cause Notice and Penalty Amount:
The Revenue contended that the Commissioner should have examined all clauses under Business Auxiliary Services and not just clause (vi). The Tribunal rejected this argument, stating that the show-cause notice specifically invoked clause (vi), and the adjudicating authority is not expected to expand the scope of the notice. The Tribunal also found merit in the Revenue's contention regarding the penalty amount under Section 78 related to Education Cess, noting that the adjudicating authority had missed including the amount of Education Cess while imposing the penalty.

Conclusion:
Both the appeals were dismissed except for the Revenue's appeal relating to the penalty amount under Section 78 concerning Education Cess. The Tribunal upheld the classification of the assessee's services under Business Auxiliary Services, the invocation of the extended period of limitation, and the imposition of penalties. The Tribunal also clarified that the adjudicating authority should not expand the scope of the show-cause notice.