2017 (11) TMI 1398 - AT - Service Tax

Business Auxiliary Services - consideration received from various banking / non-banking financial institutions for the services provided for business promotion / marketing services - extended period of limitation - Held that - there was much confusion whether such services are taxable or not, the issue had traveled upto the Larger Bench taking and the matter reached finality in the order dated 12.9.2013 of the Larger Bench - the department yet did not issue show cause notice proximate to that decision and within the period of limitation. The proceedings initiated invoking extended period is hit by limitation - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant is liable to pay service tax on amounts received from financial institutions for business promotion services.
2. Whether the demand raised and penalty imposed on the appellant are sustainable.
3. Whether the proceedings initiated against the appellant are time-barred.

Analysis:
1. The appellant, registered under service tax for motor vehicle servicing and Business Auxiliary Service, received consideration from financial institutions for business promotion services. The issue of liability to pay service tax on such amounts was in question. The appellant argued that they started discharging service tax liability from 4.5.2012, and the show cause notice issued on 16.4.2014 was beyond the limitation period. The appellant contended that the issue was settled by the Larger Bench in a previous case, and they acted under a bonafide belief. The Tribunal noted that the department did not issue the show cause notice promptly after the Larger Bench decision, rendering the proceedings time-barred.

2. The appellant's counsel argued strongly on the ground of limitation, citing the decision of Pagariya Auto Center by the Larger Bench. The department, represented by the learned AR, maintained that the appellant had not discharged the service tax liability during the disputed period. However, the Tribunal considered the confusion surrounding the taxability of such services and the delay in issuing the show cause notice post the Larger Bench decision. The Tribunal found the demand and penalty unsustainable due to being time-barred.

3. The Tribunal referenced the decision in Pagariya Auto Center, which clarified the taxability of services provided by automobile dealers to financial institutions. Despite the decision being made in 2013, the show cause notice against the appellant was issued in 2014, beyond the limitation period. The Tribunal emphasized that the department's delay in initiating proceedings after the Larger Bench's decision rendered the impugned order time-barred. Consequently, the Tribunal set aside the order and allowed the appeal with any consequential relief.

This comprehensive analysis of the judgment highlights the issues of service tax liability, sustainability of demand and penalty, and the time-barred nature of the proceedings. The Tribunal's decision was based on the interpretation of relevant legal precedents and the application of the limitation period, ultimately leading to the allowance of the appeal due to the time-barred nature of the proceedings.