2017 (9) TMI 1068 - AT - Service Tax

Business Auxiliary services - execution of the project of smart card for vehicle registration implementing the SOC-VRC project - contention by the Revenue in their appeals is that the Original Authority erred in holding that the respondent were not liable to service tax under BAS finding the nature of service as statutory and sovereign, as provided by the Governments - Held that - Admittedly, the smart card for vehicle registration is issued by Government of Maharashtra. The applicant for such smart card cannot be considered as a client to be covered under BAS tax entry. The registration of vehicle is a statutory obligation and non-compliance will attract penal consequences. GOM is implementing such statutory provision. The fee for issuing such card is fixed in terms of motor vehicle regulations and as noted by the Original Authority on payment of such fee only the process of preparation of smart card can be initiated. The fact that the Government has outsourced some part of the work and paid certain consideration for such outsourced work does not take away the merit that the whole process of issue of smart card for applicant is statutory function which only the Government Road Transport Authority can do - there is no scope for application of clause (vi) of Section 65 (19) in the scheme of things, as discussed above, there is no provision of service on behalf of the client in the present case. The Hon ble Madhya Pradesh High Court in the case of CCE, Bhopal Vs. Smart Chip Limited 2015 (7) TMI 886 - MADHYA PRADESH HIGH COURT relying on the decision of the Tribunal in CCE, Indore Vs. Ankit Consultancy Limited 2006 (10) TMI 61 - CESTAT, NEW DELHI held that the activities of the appellant with reference to service centres in different offices of the transport department cannot be taxed under Business Auxiliary Service. Appeal dismissed - decided against Revenue.

Summary

Issues:
Revenue's appeal against dropping of demand proceedings for service tax under "business auxiliary service" by Commissioner of Central Excise, Indore.

Analysis:
1. The Revenue contended that the respondent provided taxable service under "business auxiliary service" for assisting in the SOC-VRC project, leading to demand proceedings for service tax. The Revenue argued that the service provided was not sovereign or statutory, as claimed by the Original Authority, as the work was done for private parties, not the government.

2. The respondent defended against the demand, stating that the impugned order correctly analyzed the scope of work undertaken and cited case laws supporting their position. The impugned order examined the nature of work undertaken by the respondent and concluded that it was sovereign in nature, not falling under taxable services.

3. The Tribunal examined the facts and legal provisions presented by both sides. The dispute centered around the work undertaken by the respondent in relation to the SOC-VRC project. The Tribunal noted that the Revenue's claim of service tax liability under "business auxiliary service" lacked clarity on the client-recipient relationship, as the work was linked to statutory functions of the Government of Maharashtra.

4. The Tribunal found that the preparation of smart cards by the respondent was directly linked to the statutory obligation of the government for vehicle registration. The Tribunal rejected the Revenue's argument that the respondent was providing service on behalf of a client, as the issuance of smart cards was a statutory function of the government, not a commercial service.

5. The Tribunal dismissed the Revenue's appeal, emphasizing that the work undertaken by the respondent was sovereign in nature and not covered under taxable services. The Tribunal also highlighted the relevance of case laws and previous judgments to support its decision, ultimately upholding the impugned order dropping the demand proceedings.

6. In conclusion, the Tribunal found no merit in the Revenue's appeals and dismissed them, along with the linked miscellaneous applications, based on the analysis of the nature of work undertaken by the respondent in the SOC-VRC project and the absence of a client-service provider relationship in the context of statutory functions performed by the government.