2023 (5) TMI 607 - AT - Service Tax

Levy of Service Tax - training fee and other service charges received by the appellant in respect of BAS rendered by it for promoting the business of units, who were receiving the services - applicability of N/N. 13/2003-ST, dated 20.6.2003 - HELD THAT - Principles of natural justice requires that a show cause notice must analyze the transactional documents in the light of the relevant statutory provisions and frame allegations against an assessee. Until and unless the show cause notice explains as to how the activity of an assessee falls within the scope of the relevant service tax provisions, allegations in the notice become futile. Mere bald allegations in a notice are not enough to sustain the demand against the appellant. The impugned order has confirmed the demand of service tax on the income of Rs.64,21,843/- by observing that the contention of the appellant that it is covered under other litigation is factually incorrect. However, the impugned order has no finding as to how these charges are actually covered under the scope of BAS. A perusal of the nature of activities to which the said income pertains shows that they are service charges for the year 2004-05, received on account of Head Office, Bhopal; Emporium, Bhopal; Emporium, Jabalpur, Emporium, Rewa;Civil Department, Bhopal; Indore, Jabalpur and Gwalior. Further, bifurcation of the said income is between service charges received from Emporium division and service charges received by the civil department. Reliance placed on the decision of the Supreme Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT , where in it was held that composite contracts involving supply of goods coupled with provision of labour/services are covered under the scope of works contract services as defined in section 65(105)(zzzza) of the Finance Act, 1994 only with effect from 01.06 2007. Thus, where the period of dispute is prior to the introduction of the statutory provision of works contract service, the impugned order cannot be upheld - appeal allowed.

Summary

Issues involved: Assessment of Service Tax under Business Auxiliary Services (BAS) for promotion and marketing activities, exclusion of certain income categories from taxable value, burden of proof on the department, classification of activities as BAS or works contract services.

The judgment dealt with an appeal challenging an Order-In-Original regarding the demand of Service Tax under the category of BAS on service charges received by the appellant for promoting business activities. The Commissioner confirmed the demand for the period 2004-05, excluding certain incomes like technical inspection charges and profit from trading of brass scrap. The appellant contended that the burden to prove taxability lies with the department and the show cause notice lacked specific details justifying the tax liability. The appellant argued that the nature of activity was a composite works contract, not BAS. The Departmental Representative supported the impugned order. The Tribunal considered whether the training fee and service charges were liable to service tax. It noted that the show cause notice was vague and lacked analysis of how the activities fell under BAS. The Tribunal emphasized that mere booking of income as service charges does not automatically render it taxable under BAS without proper justification. The Tribunal also examined the issue on merit and found that the activities of the appellant were more in line with works contract services rather than BAS, based on the nature of construction contracts undertaken. Citing relevant legal precedent, the Tribunal set aside the impugned order, ruling in favor of the appellant.

The judgment highlighted the importance of proper analysis and justification in show cause notices to establish tax liability, especially in cases involving complex activities like construction contracts. The Tribunal emphasized the need for concrete evidence and clear classification of services to levy service tax, ensuring fairness and adherence to legal principles in tax assessments.