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2014 (6) TMI 592 - AT - Service TaxDemand of service tax - Business Auxiliary service - Whether the services rendered were classifiable under BAS prior to 16-6-2005 or not - Held that - Activities undertaken by the appellant for which they were collecting service charges were in respect of cargo imported or exported by their customers and this fact is evident from the nature of service charges collected - services were in relation to procurement of goods or services, which are inputs for the client and such services clearly fell under sub-clause (iv) of section 65 (19) as it stood with effect from 10-9-2004. Even if it is held that these activities did not fall under sub-clause (iv), they would certainly fall under sub-clause (vii) as any service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi). Even if the appellant had acted as a commission agent as claimed by them, they would fall under sub-clause (vii) of clause (19) of section 65 as the entry covered the services rendered as a commission agent. From the statutory definition of BAS as it stood prior to 10-9-2004, the services rendered by the appellant would not come under any of the activities specified under various sub-clauses, namely, (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; (ii) promotion or marketing of service provided by the client; (iii) any customer care service provided on behalf of the client; or (iv) any incidental or auxiliary support service in respect of (i) to (iii). Therefore, there would not be any liability to pay service tax prior to 10-9-2004 on the appellant. Extended period of limitation - Held that - bonafide belief is not blind belief and belief can be said to be bona fide only when it is formed after all reasonable considerations are taken into account. No evidence has been led before us showing that the appellant took all reasonable pre-cautions. - extended period of limitation applicable. The services rendered by the appellant are liable to service tax under Business Auxiliary Service as defined in 65 (19) of the Finance Act, 1994 for the period from 10-9-2004 onwards - The consideration received shall be treated as cum-tax and the service tax liability shall be re-computed for the period from 10-9-2004 onwards - The appellant shall be liable to penalties under sections 76, 77 and 78 of the said Finance Act, on the re-determined service tax liability - For the period from 10-5-2008, penalty under section 78 alone shall apply and not that under section 76 - Decided partly in favour of assessee.
Issues Involved:
1. Classification of services rendered by the appellant. 2. Applicability of service tax under "Business Auxiliary Service" (BAS). 3. Validity of extended period for demand. 4. Entitlement to cum-tax benefit. 5. Imposition of penalties under sections 76, 77, and 78 of the Finance Act, 1994. Detailed Analysis: 1. Classification of Services Rendered by the Appellant: The appellant, registered under "Steamer Agent Services," was found collecting various service charges related to import/export cargo. The department classified these services under "Business Auxiliary Service" (BAS) effective from 1-7-2003, leading to a service tax demand. The appellant argued that the show cause notice and the impugned order did not specify the sub-clause of BAS under which their activities fell. The Tribunal held that the show cause notice clearly described how the activities fell under BAS, and the absence of a specific sub-clause did not vitiate the notice or proceedings, citing J.K. Steel Ltd. [1978 (2) ELT J 355 (SC)]. 2. Applicability of Service Tax under BAS: The appellant disputed the liability to pay service tax before 16-6-2005. The Tribunal examined the statutory definitions of BAS and concluded that the services rendered by the appellant fell under sub-clause (iv) of section 65(19) as it stood from 10-9-2004. Even if not under sub-clause (iv), the services would fall under sub-clause (vii). The Tribunal rejected the appellant's contention that services should be rendered "on behalf of the client" to qualify under BAS, clarifying that this condition applied only to specific sub-clauses. The Tribunal held that the appellant was liable to pay service tax from 10-9-2004 but not before. 3. Validity of Extended Period for Demand: The appellant claimed a bona fide belief that their activities were not liable to service tax, arguing against the invocation of the extended period. The Tribunal found this contention untenable, noting that the appellant, a service tax assessee since 1997, ignored a CBEC circular expanding BAS scope in 2004. The appellant's failure to disclose activities and consideration received amounted to suppression of facts, justifying the extended period for demand. The Tribunal cited Neminath Fabrics [2010 (256) ELT 369 (Guj)] and Union Quality Plastic Ltd. [2013 (294) 222 (Tri-LB)] in support. 4. Entitlement to Cum-Tax Benefit: The appellant argued for cum-tax benefit, as they had not collected service tax during the impugned period. The Tribunal found merit in this contention, applying the ratio of Advantage Media Consultant [2008 (10) STR 449] affirmed by the Apex Court [2009 (14) STR J49 (SC)], and directed re-computation of service tax liability treating the consideration received as cum-tax. 5. Imposition of Penalties: The Tribunal upheld the imposition of penalties under sections 76, 77, and 78 of the Finance Act, 1994. Penalty under section 76 was for delay/default in payment of duty, requiring no mens rea. Penalty under section 77 was for violation of statutory provisions. Penalty under section 78 was for suppression/willful mis-statement of facts. The Tribunal noted that both penalties under sections 76 and 78 could be levied simultaneously, as held by the Kerala High Court in Krishna Poduval and the Delhi High Court in Bajaj Travels. However, for the period from 10-5-2008 onwards, only penalty under section 78 would apply. Conclusion: 1. The services rendered by the appellant are liable to service tax under BAS from 10-9-2004 onwards. 2. The consideration received shall be treated as cum-tax, and service tax liability re-computed from 10-9-2004 onwards. 3. The appellant is liable to interest on the re-computed service tax liability. 4. Penalties under sections 76, 77, and 78 apply, with section 78 alone applicable from 10-5-2008 onwards. 5. The matter is remanded to the adjudicating authority for re-quantification of service tax liability and consequential interest and penalties. The appeal is disposed of in these terms.
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