2019 (6) TMI 1239 - AT - Service Tax

Classification of services - Business Auxiliary services or not - appellant was acting as a marketing agent for several banks and financial institutions who are engaged in the business of car finance - HELD THAT - The matter in its entirety is no longer res integra as it has been already been decided by this Tribunal in the case of BRIJ MOTORS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, KANPUR 2011 (11) TMI 410 - CESTAT, NEW DELHI that the activity undertaken by the appellant as mentioned in the preceding paragraph is covered by the definition given under section 65 (19) of the Finance Act, 1994 and is appropriately classifiable under the category of Business Auxiliary Service - This Tribunal has taken a similar view in the case of VED AUTOMOTIVES VERSUS COMMISSIONER OF CENTRAL EXCISE, KANPUR 2016 (11) TMI 836 - CESTAT ALLAHABAD whereunder it has been held by this Tribunal that the activity akin to the one taken by the appellant is rightly classifiable under service category of Business Auxiliary Service . Thus, the activity undertaken by the appellant is rightly classifiable under Business Auxiliary Service . Penalty u/s 78 of FA - HELD THAT - The appellant had deposited the entire amount of Service Tax demanded under the Show cause notice dated 30 November, 2006 along with interest much before the issue of show cause notice. Secondly, there was a certain amount of confusion at the field level for proper classification of activity undertaken by the appellant as to whether it is classifiable under the category of Business Auxiliary Service or under Business Support Service and since there have been multiplicity of interpretation with regard to the applicability of service tax law in the nature of activity undertaken by the appellant, the issue of imposition of penalty under section 78 of Finance Act is not warranted - the imposition of penalty under section 78 in this case is not justified. The confirmation of Service Tax demand is justified but the imposition of penalty under section 78 of the Finance Act, 1994 is set aside - appeal allowed in part.

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of the extended period of limitation.
3. Imposition of penalties under Section 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:

The primary issue was whether the services rendered by the appellant fell under 'Business Auxiliary Service' (BAS) or 'Business Support Service' (BSS). The Department argued that the appellant's activities, such as soliciting customers for car loans, advertising loan facilities, and facilitating loan applications, fell under BAS as defined in Section 65(19) of the Finance Act, 1994. The appellant contended that these services should be classified as BSS, which became taxable only from 01 May 2006.

The Tribunal referred to the agreements between the appellant and various banks/NBFCs, which indicated that the appellant was engaged in promoting and marketing the services of these financial institutions. The Tribunal cited previous decisions, including Brij Motors Pvt. Ltd. vs. CC Kanpur and Ved Automotive vs. Commissioner of Central Excise, Kanpur, which had held similar activities to fall under BAS. The Tribunal concluded that the appellant's activities were rightly classifiable under BAS, as they involved direct interaction with customers on behalf of the banks/NBFCs, promoting and marketing their loan services.

2. Applicability of the Extended Period of Limitation:

The appellant argued against the applicability of the extended period of limitation, citing multiplicity of interpretations and classification issues. The Tribunal acknowledged the appellant's contention but upheld the Department's view, referencing the consistent classification of similar activities under BAS in previous cases. The Tribunal noted that the appellant had already deposited the service tax and interest before the issuance of the show cause notice, which indicated awareness of the tax liability.

3. Imposition of Penalties under Section 78 of the Finance Act, 1994:

The appellant contested the imposition of penalties, arguing that there was no deliberate intent to evade tax, and the entire amount of service tax along with interest had been paid before the show cause notice was issued. The Tribunal agreed with the appellant, citing a lack of evidence for fraud, collusion, willful mis-statement, or suppression of facts. The Tribunal referred to the decisions in BAS Engineering Pvt. Ltd. vs. Commissioner of Service Tax, Delhi and Cosmic Dye Chemical vs. CCE, Bombay, which supported the view that penalties under Section 78 should not be imposed in the absence of deliberate violations.

Conclusion:

The Tribunal upheld the classification of the appellant's services under 'Business Auxiliary Service' and confirmed the demand for service tax. However, it set aside the penalties under Section 78 of the Finance Act, 1994, due to the appellant's prior payment of tax and interest and the absence of any deliberate intent to evade tax. The appeal was thus directed accordingly.