2017 (12) TMI 967 - AT - Service Tax

Business Auxiliary services - services provided by the appellant to various clients on behalf of other event managing parties like M/s Rural Communication Marketing Pvt. Ltd. and M/s Lintas India (P) Ltd. - case of Revenue is that Since, the appellants did not organize the events, road shows directly for the client, the services rendered were sought to be taxed as BAS - extended period of limitation - Held that - there is no merit in the submission of the appellant that the parties to whom they raised bill and received the consideration cannot be considered as their clients or service recipient. The services were rendered to the main client on behalf o these two parties. Though, the appellant provided only part of the service which was agreed upon between these two parties and the ultimate client, the same will be squarely covered under the tax entry of BAS provision of service on behalf of the client - There is a reason for a bonafide belief in such arrangement regarding non-liability of sub-contractor when the main contractor is liable to discharge full service tax. Though the said principle is not applicable against the tax liability but the question of invoking extended period is to be answered in favor of the appellant - there is no case of fraud, mis-statement etc. in the non-payment of tax on this activity by the appellant, extended period cannot be invoked. N/N. 16/2002-ST - services rendered by the appellant through M/s Lintas India (P) Ltd. for UNICEF - denial on the ground that the appellants did not provide service directly to UNICEF - Held that - Though the bills were raised in the name of M/s Lintas India (P) Ltd., the nature of service is clearly mentioned as charges towards branding cost of three UNICEF Van, UNICEF Girl Star activities, cost of UNICEF Float Operational for 30 days, branding of Van for UNICEF. A perusal of these bills make it clear that the services are for UNICEF though the bill is raised through M/s Lintas India (P) Ltd. - denial of exemption not sustainable. Appeal allowed in part.

Summary

Issues:
1. Taxability of services provided on behalf of clients under Business Auxiliary Service.
2. Denial of exemption under Notification No. 16/2002-ST for services provided to UNICEF.

Analysis:

Issue 1: Taxability of services provided on behalf of clients under Business Auxiliary Service
The appeal challenged a tax demand related to services provided by the appellant to clients through event managing parties. The services included road shows and events carried out by the appellant on behalf of main parties like M/s Rural Communication Marketing Pvt. Ltd. and M/s Lintas India (P) Ltd. The dispute centered on whether the services rendered by the appellant should be taxed as Business Auxiliary Service (BAS) under Section 65(19)(vi) for providing services on behalf of the client. The appellant argued that since the main parties charged the full amount for the services along with service tax from the main client, they should not be considered intermediaries for tax under BAS. However, the tribunal disagreed, stating that the services were indeed rendered on behalf of the main parties to the main client, falling within the scope of BAS. While acknowledging the appellant's argument regarding the full payment of service tax by the main parties, the tribunal held the appellant liable for service tax under BAS.

Issue 2: Denial of exemption under Notification No. 16/2002-ST for services provided to UNICEF
The second issue revolved around the denial of exemption under Notification No. 16/2002-ST for services provided by the appellant to UNICEF through M/s Lintas India (P) Ltd. The lower authorities had rejected the exemption claim, contending that the services were not directly provided to UNICEF. However, the tribunal examined the bills raised by the appellant, which clearly indicated that the services were for UNICEF, despite being invoiced through M/s Lintas India (P) Ltd. The tribunal noted that the nature of the services, such as branding costs for UNICEF activities, demonstrated that the services were indeed intended for UNICEF. Consequently, the tribunal accepted the appellant's claim for exemption under Notification No. 16/2002-ST, ruling in favor of the appellant on this issue.

In conclusion, the tribunal partially allowed the appeal, upholding the tax liability under BAS for services provided on behalf of clients while granting the exemption under Notification No. 16/2002-ST for services rendered to UNICEF through M/s Lintas India (P) Ltd.