2016 (2) TMI 772 - AT - Service Tax

Business auxiliary service - Appellant receives its brokerage from the borrower - principal agent relationship - period between 2005-06 and 2009-10 - Held that - In view of an equation that is devoid of an agency relationship with the financier and rules out the provision of a service on behalf of the borrower from whom the appellant receives consideration, the activities of the appellant are outside the ambit of business auxiliary service . - Decided in favor of assessee.

Summary

Issues:
Classification of appellant as a provider of 'business auxiliary service'; Allegations of inexactitude in show cause notice and adjudication order; Interpretation of section 65(19) of Finance Act, 1994; Applicability of circular no. 87/05/2006-ST; Comparison with case laws; Determination of appellant's activities as 'business auxiliary service'.

The judgment addresses the challenge by M/s Fulchand Tikamchand against the decision of the Commissioner of Central Excise, Nagpur imposing service tax on them as a provider of 'business auxiliary service' for the period between 2005-06 and 2009-10. The appellant, a finance broker, contests this classification, claiming to merely connect potential borrowers with financiers and receive brokerage from borrowers without entering into contracts with either party. The issue of inexactitude in the show cause notice and adjudication order is raised, with the tribunal emphasizing the importance of accurately identifying the taxable service under section 65(19) of the Finance Act, 1994.

The tribunal scrutinizes the lower authority's classification of the appellant as a commission agent and its reliance on section 65(19)(vii) of the Finance Act, 1994. It is highlighted that a commission agent is deemed a provider of 'business auxiliary services', but the appellant's activities do not align with this classification. The tribunal references case laws and clarifies that the appellant's role as a broker does not establish an agency relationship with either the financier or the borrower, thus falling outside the scope of 'business auxiliary service' as defined in the Act.

The judgment dissects the applicability of circular no. 87/05/2006-ST, emphasizing that the appellant's activities do not meet the criteria of a 'commission agent' as per the definition requiring acting on behalf of another person for a consideration linked to the sale or purchase of goods or services. The tribunal concludes that the appellant's activities, although benefiting financiers, do not involve receiving consideration from them, thereby ruling in favor of the appellant and setting aside the impugned order.