2019 (11) TMI 840 - HC - Service Tax

Inquiry proceedings / summons under service tax - Business Auxiliary Services - the present Writ Petition challenging summons dated 28.09.2010 calling for the attendance of the petitioner along with TDS statements for the previous five years, Credit/Debit notes received from finance company/TVS Motor Company and free service details - HELD THAT - This Writ Petition is premature. What has been challenged is a summons issued in terms of the provisions of Section 14 of the Central Excise Act, 1944, which entitles the Central Excise Officer, duly empowered by the Central Government in that behalf, to summon persons to give evidence and produce documents in an on-going enquiry. In the present case, enquiry is admittedly on-going in regard to the taxability of the commission received by the petitioner. The apprehension of the petitioner appears to be that the respondent has pre-determined the issue and is hence merely seeking to collate requisite documents to enable the issuance of a show cause notice without application of mind as to whether such show cause notice is actually called for or not. In the present case, the question as to whether the petitioner is actually rendering services to the finance companies is one of fact. One cannot deny that there is a symbiotic relationship between the petitioner and the financial institutions and one does benefit from the efforts of the other in terms of furthering their own respective business interests - The petitioner by the efforts of the finance companies, gets the benefit of increased business, quite apart from the the finance company benefiting by the marketing efforts of the petitioner. However, whether such an arrangement would fall within the realm of 'taxable services' is yet unclear and will emanate only upon further detailed enquiry of facts. It would be appropriate to direct the petitioner to cooperate with the on-going enquiry, appear before the respondent for completion of proceedings and allow the same to come to a logical conclusion. While dismissing the Writ Petition and fixing a date when the petitioner will appear before the respondent for enquiry, it is made clear that the respondent shall not approach this issue with a pre-determined mind - petition dismissed.

Summary

Issues:
Taxability of commission received by a partnership firm from finance companies for providing desk space, whether the activity constitutes taxable service under the Finance Act, 1994, and the challenge to the summons issued by the Service Tax Authorities.

Analysis:
1. The petitioner, a partnership firm, receives commission from finance companies for providing desk space within its premises for documentation purposes. The petitioner argues that this activity does not constitute taxable service under the Finance Act, 1994, despite receiving income from the commission. The firm resists a summons from the Service Tax Authorities, challenging its tax liability on the commission received.

2. The Revenue contends that the Writ Petition is premature as it challenges a summons issued under Section 14 of the Central Excise Act, 1944, which empowers the authorities to summon persons for evidence in an ongoing enquiry. The petitioner's apprehension is that the authorities have pre-determined the issue and seek documents to issue a show cause notice without proper consideration.

3. The statutory provision under scrutiny is Section 65(19) of the Finance Act, 1994, which defines 'business auxiliary service.' The question of whether the petitioner's activity falls within the scope of taxable services depends on the factual determination of whether the firm is rendering services to the finance companies. The symbiotic relationship between the petitioner and financial institutions benefits both parties, but the taxability of such arrangements requires further detailed enquiry.

4. Previous decisions by the Customs, Excise and Service Tax Appellate Tribunal and the CESTAT are cited to support both sides of the argument. The CESTAT's stance is that the taxability of such services needs a case-by-case analysis based on factual evidence, and the provision of desk space may not always constitute business auxiliary services subject to tax.

5. The High Court dismisses the Writ Petition, directing the petitioner to cooperate with the ongoing enquiry and appear before the authorities for completion of proceedings. The Court emphasizes the need for a fair examination of factual aspects before reaching a conclusion on the taxability of the commission received. The authorities are instructed not to approach the issue with a pre-determined mindset, ensuring a thorough assessment before issuing any further notices or conclusions.