2014 (11) TMI 541 - AT - Service Tax

Business Auxiliary Service - Services of Verification of information given by customers applying for credit cards, home loans, auto loans etc. are covered under clause (iv) of Business Auxiliary Services during the period 01.07.2003 to 09.09.2004 - Held that - Prior to 10.09.2004, the activity undertaken by the appellant clearly falls under Clause (iv) of Section 65(19) of the Finance Act, 1994. Therefore, prior to 10.09.2004, we hold that the appellant is required to pay service tax and the demand for service tax for that period is confirmed. With effect from 10.09.2004 onwards the appellants are not required to pay service tax. We find support to the case from the decision of this Tribunal in the case of S.R. Kalyanakrishnan v. CCE - 2007 (8) TMI 198 - CESTAT, BANGALORE wherein this Tribunal has observed that verification of information furnished by loan seekers cannot be treated as promotion their business. Therefore, such activity does not fall under Business Auxiliary Service but with effect from 01.05.2006, it falls under the category of Business Support Service . Following the precedent decision in the case of S.R. Kalyanakrishnan (supra), we hold that for the period 10.9.2004 onwards the appellants are not liable for service tax under the category of Business Auxiliary Service on their activities. Appellants are liable to pay service tax for the period 01.07.2003 to 09.09.2004 on the services provided to ICICI and IDBI Banks under the category of BAS . With these terms the appellants are directed to pay service tax for the said period along with interest. as the appellants are paying service tax on the same activities provided to other banks therefore, we impose penalties equivalent to their service tax liabilities on the appellants under Section 78 of the Finance Act, 1994. We further find that as the appellants have not charged service tax separately from ICICI and IDBI Banks therefore, the remunerations received towards providing service, service tax shall be treated as cum-service charges - Decided partly in favour of assessee.

Summary

Issues:
Service tax liability under Business Auxiliary Service for the period July 2002 to March 2006.

Analysis:
The appellants challenged the impugned orders confirming service tax liability under Business Auxiliary Service for the mentioned period. The activities involved verification services for customers applying for financial products, outsourced by banks. The Revenue contended non-payment of service tax for services to specific banks, invoking extended limitation period due to apparent evasion. The appellant argued that their activities fell under Business Support Service post-May 2006, not requiring service tax payment under Business Auxiliary Service before that. The Revenue cited Section 65(19) of the Finance Act, 1994, defining Business Auxiliary Service, asserting tax liability from July 2003. The Tribunal analyzed the definitions pre and post amendment, holding liability pre-September 2004 but exempting post-amendment activities from service tax.

The Tribunal referred to a precedent case where verification services were not considered promotion of business, supporting the appellants' position post-September 2004. It concluded that service tax was due for the period from July 2003 to September 2004 for services to specific banks, directing payment with interest. Penalties were imposed under Section 78 of the Finance Act, 1994, equivalent to service tax liabilities, as the appellants had not separately charged service tax from the banks. The remunerations received were treated as cum-service charges due to the absence of separate service tax charges. The appeals were disposed of accordingly.