2016 (12) TMI 604 - AT - Service Tax

Business auxiliary services - preparation of ID cards for fresh and renewed bus passes on behalf of the APSRTC to their customers and collecting amounts for the above items on their behalf - Held that - Para 16 of the agreement mandates that the software should not be utilized, sold or handled by any other individual, outsider agency etc. except APSRTC during the period of contract. From a perusal of these aspects, it clearly shows that the appellant is very much in the activity of developing and maintenance of computer software for APSRTC. This being so, their activity clearly falls within the ambit of Explanation to definition of BAS under Section 65(19) as it existed during the period of dispute. For these reasons, we are of the considered opinion that the activity carried out by the appellant is definitely in the nature of IT services and hence will have to be necessarily excluded from quantification under category of BAS. The impugned order is therefore not sustainable and is therefore set aside - appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Whether the activities of preparing ID cards for bus passes constitute Business Auxiliary Service (BAS) for service tax liability.
2. Interpretation of the scope of BAS in relation to IT services.
3. Validity of the demand raised by the original authority and penalties imposed.

Analysis:
1. The appellants were providing services of preparing ID cards for bus passes on behalf of APSRTC and collecting amounts for these services. The Department considered these activities as falling under BAS and imposed a demand of ?10,38,813/- for a specific period, along with penalties. The Commissioner(Appeals) partially upheld the original order, leading to the current appeal.

2. During the hearing, the appellant's counsel relied on a circular excluding IT services from BAS and cited a Tribunal decision to support their argument. The respondent argued that the services provided did not qualify as IT services and thus were liable for service tax under BAS.

3. The Tribunal examined the facts, including statements and agreements between the appellant and APSRTC. It was noted that the appellant was involved in developing and maintaining computer software for APSRTC, as evidenced by the software used, hardware provided, and exclusivity clauses in the agreement. Consequently, the Tribunal concluded that the appellant's activities were akin to IT services and fell outside the scope of BAS. Therefore, the impugned order was set aside, and the appeal was allowed with any consequential reliefs.

This judgment clarifies the distinction between IT services and BAS, emphasizing the nature of activities performed and the contractual obligations of the parties involved. The decision highlights the importance of analyzing the specific details of services provided to determine the appropriate tax liability, ensuring compliance with relevant legal provisions and definitions.