2015 (8) TMI 799 - AT - Service Tax

Business Auxiliary Service - Penalty u/s 76 - Exemption under Notification No.13/2003-ST, dated 20.06.2003 - Held that - Activities undertaken was neither a promotion or marketing or sale of goods belonging to the client, i.e., M/s. Singh Traders nor it was promotion or marketing of the service provided by the client. Indeed, the activity was not captured under any of the limbs of the definition of BAS given under Section 65 (19) ibid during the relevant period - Thus, if the agreement is not considered, then there is no evidence of the nature of service rendered by the appellant and if it is considered the nature of service rendered by the appellant does not fall under BAS. So any which way, the impugned demand component pertaining to the activity done by the appellant for M/s. Singh Traders is not sustainable. In the absence of contract, there will be no basis for the primary adjudicating authority or the Commissioner (Appeals) to even ascertain as to what was the nature of service rendered in which case as reasoned in the preceding para (para - 5) the demand pertaining to the service rendered to M/s. Punjab Chemical Agency would not be sustainable. - appellant was essentially working as a commission agent and as per Notification No.13/2003-ST, dated 20.06.2003, BAS provided by a commission agent was exempted from the levy of service tax - the service rendered to M/s. Punjab Chemical Agency was clearly exempted under the said Notification - Decided in favour of assessee.

Issues:
1. Confirmation of service tax demand under Business Auxiliary Service.
2. Exemption of commission under Notification No.13/2003-ST.
3. Nature of services rendered to M/s. Singh Traders and M/s. Punjab Chemical Agency.
4. Reliability of contracts submitted during adjudication.

Confirmation of service tax demand under Business Auxiliary Service:
The appellant filed an appeal against the Order-in-Appeal upholding the Order-in-Original confirming a service tax demand of Rs. 36,55,731 under Business Auxiliary Service, along with interest and penalty under Section 76 of the Finance Act, 1994. The primary adjudicating authority held that the services provided by the appellant fell under Business Auxiliary Service as defined in Section 65(19) of the Finance Act, 1994. The appellant contested this classification, arguing that the services rendered did not fall under the definition of BAS during the relevant period.

Exemption of commission under Notification No.13/2003-ST:
Regarding the services provided to M/s. Punjab Chemical Agency, the appellant claimed that it was acting as a commission agent, and such commission was exempted under Notification No.13/2003-ST. The contract with M/s. Punjab Chemical Agency authorized the appellant to book orders on their behalf for specific products, and the commission received was based on the quantum of sales. The appellate authority noted that the service provided by the appellant to M/s. Punjab Chemical Agency fell under the exemption provided for commission agents in the said Notification.

Nature of services rendered to M/s. Singh Traders and M/s. Punjab Chemical Agency:
The contracts entered into by the appellant with M/s. Singh Traders and M/s. Punjab Chemical Agency were scrutinized. The contract with M/s. Singh Traders involved supervising loading and dispatches of molasses, ensuring smooth movement of lorries/tankers, and collecting information on molasses quantities. The appellate authority observed that the services provided did not align with the definition of Business Auxiliary Service during the relevant period. Similarly, the contract with M/s. Punjab Chemical Agency indicated that the appellant was essentially working as a commission agent, exempted from service tax under the relevant Notification.

Reliability of contracts submitted during adjudication:
The Departmental Representative raised concerns about the contracts submitted by the appellant during adjudication, suggesting they could have been fabricated as they were not produced during the investigation. The appellate authority emphasized the importance of these contracts in determining the nature of services rendered. It was noted that without these contracts, there was no basis for the adjudicating authority to ascertain the nature of services, making the demand unsustainable. The appellate tribunal concluded that without reliable contracts, the demand related to services provided to both entities was not sustainable, leading to the quashing of the impugned order and allowing the appeal.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by the parties, and the tribunal's findings regarding the classification of services and the applicability of service tax under Business Auxiliary Service.

← Previous Next →