2020 (6) TMI 257 - AT - Service Tax

Classification of services - Banking and Financial Services or not - non-payment of service tax on operational income received on account of transaction fees, custodial fees etc, by wrongly claiming exemption from service tax as per Board Circular No.B.II/1/200/TRU dated 09.07.2001 - HELD THAT - Throughout Appellants were providing for provision and transfer of information and data processing and these are provided in relation to their depository operations. Thus the services provided by them to Depository Participants are covered by the definition of Banking and Financial services and are liable to service tax under that category. Extended period of limitation - Held that - Appellants have taken the stand that extended period of limitation cannot be invoked as the relevant facts were in knowledge of the revenue and hence they had not suppressed anything from the revenue authorities with the intention to evade payment of tax. They have relied upon various case laws on the subject. From the facts as available on record specifically the correspondences with CBEC, the issue involved in those correspondences were in relation to Central Depository Services and not in relation to services of providing for provision and transfer of information and data processing . - Demand confirmed invoking the extended period of limitation. The benefit of cum tax value as per section 67(2) of the Finance Act, 1994 should be extended to the appellant s while determining the tax payable. The Commissioner has erred in not extending the benefit of tax already paid by the appellant in respect of certain services sought to be taxed again in the present proceedings. Hence the matter for quantification of demands on the above lines need to be remanded back to the original adjudicating authority for denovo consideration. Demand of Interest - HELD THAT - Since the demand of tax made is upheld, the demand of interest made under Section 75 of the Finance Act 1994, is also upheld. Penalties - HELD THAT - The Penalties imposed under Section 75A, 77 78 of Finance Act, 1994 is justified but needs to be redetermined in light of re-quantification of demand in de-novo proceedings. Appeal allowed by way of remand.

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Confirmation and quantification of service tax demand.
3. Recovery of interest on the confirmed demand.
4. Imposition of penalties under various sections of the Finance Act, 1994.
5. Invocation of the extended period of limitation.
6. Consideration of cum-tax value and tax already paid.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The primary issue was whether the services provided by the appellant to their Depository Participants (DPs) were classifiable under "Banking and Other Financial Services" (BOFS) as defined in Section 65(12)(vii) of the Finance Act, 1994. The Tribunal concluded that the appellant provided services in the nature of "provision and transfer of information and data processing" in relation to depository operations. This was based on the electronic linkages and data transmission between the appellant and various functionaries, including DPs, issuers, and clearinghouses. The Tribunal referenced the Bank of Baroda case, affirming that such services fall under BOFS.

2. Confirmation and Quantification of Service Tax Demand:
The Commissioner confirmed a demand of ?52,36,20,950/- for the period from 01.04.2004 to 31.03.2009. The appellant argued that the demand included duplicated amounts and amounts already taxed under other heads. The Tribunal agreed that the tax paid by the appellant during the relevant period should be considered, and the gross amount collected should be treated as inclusive of service tax (cum-tax value). The matter was remanded to the adjudicating authority for re-quantification of the demand, considering these factors.

3. Recovery of Interest on the Confirmed Demand:
The Tribunal upheld the recovery of interest under Section 75 of the Finance Act, 1994, on the confirmed demand. This decision was supported by various case laws, including P V Vikhe Patil SSK and Ballarpur Industries Limited, which affirmed that interest is payable on delayed payments of service tax.

4. Imposition of Penalties under Various Sections of the Finance Act, 1994:
Penalties were imposed under Sections 75A, 77, and 78 of the Finance Act, 1994. The Tribunal upheld these penalties but noted that they need to be re-determined in light of the re-quantification of the demand. The penalties were justified based on the appellant's failure to apply for registration, file proper returns, and disclose the full extent of their taxable services.

5. Invocation of the Extended Period of Limitation:
The Tribunal upheld the invocation of the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994. The Tribunal found that the services in question were not disclosed to the revenue authorities, justifying the extended period for demanding the tax. This decision was supported by the Neminath Fabrics and Star India Pvt Ltd cases, which allowed for the extended period in cases of non-disclosure.

6. Consideration of Cum-Tax Value and Tax Already Paid:
The Tribunal agreed with the appellant that the gross amount collected should be treated as inclusive of service tax (cum-tax value) as per Section 67(2) of the Finance Act, 1994. The Tribunal also recognized that the tax already paid by the appellant should be considered in the final quantification of the demand. The matter was remanded to the adjudicating authority for re-quantification, incorporating these considerations.

Conclusion:
The Tribunal upheld the impugned order but remanded the matter for re-quantification of the demand after allowing the benefit of cum-tax value and considering the tax already paid by the appellant. The penalties imposed under Sections 75A, 77, and 78 were upheld but required re-determination in light of the re-quantified demand. The appeal was allowed to this extent, and the matter was remanded to the adjudicating authority for further proceedings.