2016 (9) TMI 588 - AT - Service Tax

Demand - Business Auxiliary Service during the period 01-04-2005 to 31-03-2010 - appellant is running SUWIDHA (Single User-friendly Window Disposal and Help-line for Applicants) Centers at various towns of the district - providing various Government services under one roof - Held that - the commissioner in the impugned order has taken the view that provision of service on behalf of the client appearing in the definition of Business auxiliary Service, would mean that any service on behalf of any client, would be covered under it. We are of the view that such an interpretation is totally mis-placed. The business auxiliary service is rendered in relation to the business of the recipient. In the present case, the service of facilitization has been rendered to the Govt departments, which are engaged not in business but in rendering public services. Hence we find that the present case fails the basic test prescribed by CBEC in the circular dated 23.08.2007 that for charging service tax, the service should not be in the nature of statutory duties of the government. Therefore, the impugned order is set aside. - Decided in favour of appellant

Issues:
- Taxability of Services Tax under Business Auxiliary Service
- Nature of services provided by the appellant
- Interpretation of the definition of Business Auxiliary Service
- Applicability of service tax when services are in relation to statutory functions of the government

Analysis:

Taxability of Services Tax under Business Auxiliary Service:
The appeal challenged the demand of Services Tax amounting to ?51 lakhs on the appellant for rendering Business Auxiliary Service during the period 01-04-2005 to 31-03-2010 under Section 65(105)(zzb) of the Finance Act, 1994. The appellant argued that the services provided were facilitization services to the general public and did not fall under any taxable service category. They contended that since the service recipient was the Government, and the services were not in relation to business, no service tax should be chargeable. The appellant cited various cases to support their argument, emphasizing that the services facilitated were sovereign functions of the Government and hence not taxable.

Nature of services provided by the appellant:
The appellant, a registered society, operated SUWIDHA Centers providing various government services under one roof, such as issuing licenses, permissions, and registrations. They collected statutory fees and additional facilitation charges to sustain the centers. The Revenue argued that these facilitation charges constituted consideration paid by the government to the appellant for providing services to the public on behalf of the government. However, the appellant contended that for service tax to be levied under Business Auxiliary Service, the services provided should be in relation to the business of the service recipient. They highlighted that the services were facilitization services to various departments and would only be taxable if the government departments were engaged in business or commerce.

Interpretation of the definition of Business Auxiliary Service:
The definition of Business Auxiliary Service underwent changes during the period in question. The relevant portion stated that it included the provision of services on behalf of the client. The Tribunal emphasized that Business Auxiliary Service should be rendered in relation to the business of the recipient. In this case, the services provided to government departments, engaged in public services rather than business, did not meet the criteria for service tax as per the Circular dated 23.08.2007, which exempted services in the nature of statutory duties of the government from taxation.

Applicability of service tax when services are in relation to statutory functions of the government:
The Tribunal referred to previous decisions where similar views were taken, such as in cases involving toll collection and facilitation of government services. These decisions supported the argument that services related to statutory functions of the government were not covered under Business Auxiliary Service for service tax purposes. The Tribunal set aside the impugned order, allowing the appeal in line with these interpretations and precedents.

Overall, the Tribunal ruled in favor of the appellant, highlighting that the services provided were not in relation to the business of the government departments but were facilitation of statutory functions, exempting them from service tax under Business Auxiliary Service.

(Order pronounced in court on 19/07/2016)

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