2016 (12) TMI 341 - AT - Service Tax

Demand - Business Auxiliary Services - Promotion, marketing and selling of chicks - Veterinary services - Laboratory Analysis and Testing services - exemption under Notification No.13/2003 dated 20/06/2003 as commission agent - invocation of section 80 - Held that - the appellants have agreed to provide veterinary services and laboratory testing and analysis charges not only to VHPL but also to customers. In view of the above, it is apparent that the appellant not only providing services to Venco but also to the customers of Venco on behalf of Venco - It is seen that the exemption Notification No.13/2003 provides exemption to business auxiliary services provided by a commission agent from the service tax leviable thereof. However, the said notification clearly defines the commission agent to mean a person who causes sale or purchase of goods on behalf of another person for a consideration which is based on quantum of sale or purchase. In the instant case, it is clear that while the consideration is based on the quantum of sale, the services provided is not sale or purchase of goods but is in the nature of customer care on behalf of Venco/VRB. Thus, the notification No.13/2003 is not applicable in respect of Veterinary services and Laboratory Analysis and Testing services - the demand is sustainable. However, it needs to be limited to the quantum of service provided to customers of Venco/VRB. In so far as services are received by Venco/VRB it will not fall under business auxiliary service. Invocation of section 80 - Held that - It is seen that there is no doubt that part of the services provided under Veterinary services and Laboratory Analysis and Testing services was in the nature of customer care services specifically covered under the definition of Business Auxiliary Services. The Commissioner has in his order stated that since the period of dispute pertains to July 2003 to September 2004 when business auxiliary services was just brought into tax net. The benefit has been extended. We find that in the definition of business auxiliary services, there is no doubt that the service provided to a third party on behalf of the client is specifically covered leave no scope for doubt - invocation of Section 80 is incorrect. Appeal disposed off - decided partly in favor of Revenue.

Summary

Issues:
1. Interpretation of Notification No.13/2003 for exemption of service tax on services provided by VHPL.
2. Applicability of extended period for invoking tax demand.
3. Invocation of Section 80 of the Finance Act for penalty imposition.
4. Determination of liability for service tax on services provided to customers of Venco/VRB.

Analysis:
1. The appeals involved a dispute regarding the exemption of service tax on services provided by VHPL under Notification No.13/2003. VHPL claimed exemption as a commission agent for services related to promotion, marketing, veterinary services, and laboratory testing. The Tribunal analyzed the nature of services provided by VHPL and concluded that the exemption did not apply to services provided to customers of Venco/VRB, as they were in the nature of customer care services, not sale or purchase of goods.

2. The issue of invoking the extended period for tax demand was raised. The Tribunal noted that VHPL had been paying tax on services received from 2004 onwards. The Tribunal held that the extended period could not be invoked for the period before 2004 when VHPL had claimed exemption under Notification No.13/2003. The demand was limited to the services provided to customers of Venco/VRB.

3. Regarding the invocation of Section 80 for penalty imposition, the Tribunal found that VHPL had been paying tax on services provided to customers, which were covered under Business Auxiliary Services. The Tribunal concluded that the invocation of Section 80 was incorrect and allowed VHPL's appeal. The penalty equivalent to the revised duty demanded was upheld under Section 78, with no penalty imposed under Section 76 of the Finance Act, 1994.

4. The liability for service tax on services provided to customers of Venco/VRB was determined by the Tribunal. It was clarified that services provided to Venco/VRB did not fall under business auxiliary services, but services provided to their customers did. The Tribunal partly allowed the Revenue's appeal and confirmed the demand only for services provided to customers of Venco/VRB, while upholding the penalty under Section 78. The appeals were disposed of accordingly on 21/10/2016.