2014 (12) TMI 170 - AT - Service Tax

Waiver of pre deposit - multi-level marketing company - Service of providing various marketing materials for the purpose of marketing of their (the appellant s) products - Classification of service - Penalty u/s 76 & 77 - Held that - It is seen that the material provided to the distributors is clearly meant for the purpose of marketing of the appellants products and a perusal of the definition of Support Services of Business or Commerce prima facie makes it evident that this would get covered under the scope of the said definition, at least under that limb of the inclusive part which says operational assistance for marketing . It is pertinent to mention that the main part of the definition of Support Services of Business or Commerce is arguably too broad to be a valid taxable expression and therefore its inclusive part has to be fallen upon to delineate the scope of the said definition and that is what has been done presently. - Prim facie case is against the assessee. Allowing companies to address in conferences - Business Support service - Held that - The service tax was demanded on the ground that the Support Services of Business or Commerce was rendered to the insurance-related companies by providing them platform of meetings of the distributors/leaders in order to address the distributors/leaders for furtherance of their insurance business. Prima facie, it is not at once very clear as to under which the limb of the inclusive part of the aforesaid definition this activity would fall. Thus prima facie with regard to this component of demand the appellants have a fairly reasonable case for waiver of pre-deposit. Activity of Mailing List Compilation - Held that - the appellants contention that they had not compiled any data for the insurance related companies falls totally flat face first. Having thus shown that the data was actually compiled for their clients, it may not be necessary to state that a careful reading of the definition of mailing list compilation and mailing reveals that the words for or on behalf of the client are applicable only to clause (ii) of the definition and not to clause (i) because clause (ii) is separated from clause (i) by a semi colon and the word or . Separation by semi colon makes clause (i) and (i) self-contained. Thus, the contention of the appellants that the compilation has to be for or on behalf of the client does not represent the correct reading/appreciation of the statutory definition. Thus, prima facie, the department has a strong case with regard to this component of demand. A deposit of 50% of the demand components mentioned at Sr. No. 1 and 3 of the table above would meet the requirement of Section 35F of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 - Partial stay granted.

Summary

Issues:
1. Interpretation of demand related to support services of business or commerce.
2. Determination of service tax liability for providing platform for insurance-related companies at conferences.
3. Assessment of service tax liability for mailing list compilation and mailing services.
4. Allegations of wilful mis-statement and suppression of facts by the appellants.

Analysis:

Issue 1:
The first demand relates to charges for providing marketing materials for the appellant's products. The definition of Support Services of Business or Commerce under Section 65(105)(zzzq) encompasses various services related to business operations. The material provided for marketing purposes falls under the operational assistance for marketing, which is covered under this definition. The broad scope of the main definition necessitates reliance on the inclusive part to determine the applicability, which supports the demand.

Issue 2:
The second demand pertains to charges for allowing insurance-related companies to address conferences organized by the appellants. The service tax was imposed under the assumption that this activity falls under Support Services of Business or Commerce. However, the specific limb of the inclusive part under which this activity falls is not immediately clear. Hence, the appellants have a reasonable case for waiver of pre-deposit concerning this demand.

Issue 3:
The third demand concerns the amount received for supplying a database to insurance-related companies, alleged to be Mailing List Compilation and Mailing Service. The appellants argue that they did not compile data for the clients but merely provided access to existing data. However, the agreement between the parties indicates that data was tailored to the insurance companies' needs, suggesting compilation. The statutory definition clarifies that compilation need not be explicitly for or on behalf of the client, strengthening the department's case for this demand.

Issue 4:
Regarding the allegations of wilful mis-statement and suppression of facts, the appellants claim the demand arose from audit objections under correspondence. The department asserts that the appellants' failure to register, file returns, and pay service tax constitutes wilful mis-statement. The determination of wilful mis-statement involves legal and factual analysis more suited for the final hearing stage.

In conclusion, the tribunal orders a pre-deposit of 50% of the demand components related to Issues 1 and 3 within a specified timeframe. Failure to comply will result in the rejection of the appeal. Recovery of the remaining tax, interest, and penalties is stayed pending the appeal's resolution, subject to the pre-deposit compliance by the specified date.