2015 (11) TMI 1257 - AT - Service Tax

Waiver of pre deposit - Demand of service tax - Business Auxiliary Service - Held that - Prima-facie, collection of tax cannot be said to be a service provided by Government. Therefore, the demand relating to the commission received by the appellant for collection of sales tax on behalf of the Government would not fall under BAS as defined in Section 65(19) of the Finance Act, 1994, because the appellant did not provide promotion or marketing of service provided by the client, nor did it provides customer care on behalf of the client. It also did not provide any relation to procurement of goods or services which were inputs for the client or provision of service on behalf of the client. It has been held by the Supreme Court in the case of D. K. Trivedi & Sons vs. State of Gujarat - 1986 (3) TMI 328 - Supreme court of india that royalty is a tax and therefore the above reasoning given in respect of collection of sales tax applies to the component of demand pertaining to commission received for collection of royalty on mines for onward remittance to the State of Rajasthan. - appellant has a good case for waiver of pre-deposit, Accordingly, we waive the requirement of pre-deposit and stay recovery of the impugned liability during pendency of the appeal. - Stay granted.

Summary

Issues: Stay application against service tax demand for 'Business Auxiliary Service' and applicability of service tax on activities like collection of mining royalty and toll on behalf of NHAI.

Analysis:
1. The appellant challenged a service tax demand for providing 'Business Auxiliary Service' without paying tax. The appellant argued that collecting mining royalty for the Government of Rajasthan should not attract service tax as royalty is a tax itself, and collecting sales tax for the State Government does not constitute 'Business Auxiliary Service.' The appellant cited a CESTAT judgment regarding toll collection for NHAI as not falling under BAS.

2. The Departmental Representative contended that royalty is not a tax, referring to a Supreme Court judgment. They argued that collecting toll for NHAI falls under BAS as NHAI provides a service, making the toll collection a taxable service.

3. The Tribunal analyzed the submissions. It held that collecting tax does not amount to providing a service by the Government, hence not falling under BAS. Referring to a Supreme Court case, it affirmed that royalty is a tax, aligning with the argument against taxing royalty collection. The Tribunal differentiated the context of the Supreme Court judgment referenced by the Departmental Representative, indicating that reliance on the judgment supporting royalty as tax is appropriate. It also upheld the CESTAT judgment regarding toll collection for NHAI not being under BAS.

4. Consequently, the Tribunal found merit in the appellant's case for waiving pre-deposit. It decided to waive the pre-deposit requirement and stay the recovery of the tax liability pending the appeal, considering the arguments and legal precedents presented.

This detailed analysis of the judgment highlights the arguments, legal interpretations, and conclusions reached by the Tribunal regarding the service tax demand and the applicability of 'Business Auxiliary Service' to activities like mining royalty and toll collection on behalf of NHAI.