2025 (4) TMI 1330 - AT - Service Tax

Non-payment of service tax on multi service activities income and on other income - business auxiliary services - period July 2003 to September 2004 - facts and documents not considered properly - violation of principles of natural justice - HELD THAT - On reading of clause (iv) in the definition of Business Auxiliary Service it transpires that any incidental or auxiliary support service mentioned therein in relation to clauses (i) to (iii) alone can be considered for the purpose of inclusion in the definition of BAS inasmuch as the said definition uses the expression means and includes thereby providing comprehensive meaning that only those services which are incidental or auxiliary to the services categorized at (i) to (iii) would only qualify for consideration. The detailed activities undertaken by the appellants are mentioned at paragraph 9 in the impugned order. On careful examination of such activities performed by the appellants we find that the same cannot considered as incidental or ancillary to the services itemized at clauses (i) to (iii) in the definition provided under Section 65(19) ibid. However the case of the appellants falls under the amended definition of BAS w.e.f. 10.09.2004. In view of the fact that the activities undertaken by the appellants upto the period 09.09.2004 were not covered under the definition of BAS the appellants were not liable to pay any service tax under such taxable category. Further the appellants submission that they had paid the service tax for the period post 10.09.2004 on multi services activities and on the miscellaneous income were also not considered in their proper perspective inasmuch as the benefit of tax amount already paid to the government has not been considered in the impugned order. Conclusion - The learned adjudicating authority has confirmed the entire demand proposed for recovery in the SCN dated 21.04.2009 without proper appreciation of the statutory provisions vis- a-vis the activities undertaken by the appellants. The matter should be remanded to the learned adjudicating authority for passing of de novo adjudication order in quantifying actual tax liability which was required to be paid by the appellants - Appeal allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the appellants were liable to pay service tax on 'multi service activities income' and 'other income' for the period from July 2003 to September 2004 under the category of Business Auxiliary Service (BAS) as defined under Section 65(19) of the Finance Act, 1994.

- Whether the definition of BAS applicable during the relevant period (pre and post amendment w.e.f. 10.09.2004) covers the activities undertaken by the appellants.

- Whether the service tax demand on miscellaneous income is sustainable, considering the introduction of 'Business Support Service' (BSS) taxable entry w.e.f. 01.05.2006 and the payment of service tax by appellants post that date.

- Whether the demand confirmed by the adjudicating authority is barred by limitation, in absence of suppression or willful misstatement by the appellants.

- Whether the impugned order properly appreciated the statutory provisions, the activities undertaken by the appellants, and the payments already made towards service tax.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability to pay service tax on 'multi service activities income' and 'other income' for the period July 2003 to September 2004 under BAS

Relevant legal framework and precedents:

The definition of Business Auxiliary Service (BAS) under Section 65(19) of the Finance Act, 1994, is central. The definition was amended w.e.f. 10.09.2004, expanding the scope of taxable services. The unamended definition (01.07.2003 to 09.09.2004) included services related only to promotion, marketing, sale of goods or services, customer care, and incidental or auxiliary support services related to these activities.

Court's interpretation and reasoning:

The Tribunal examined both the unamended and amended definitions. It noted that the appellants' activities prior to 10.09.2004 did not fall within clauses (i) to (iii) of the unamended definition. The adjudicating authority had erroneously held that the appellants' activities qualified under clause (iv) ("any incidental or auxiliary support service"), but the Tribunal clarified that clause (iv) in the unamended definition does not exist; rather, the incidental or auxiliary support services are only those connected to clauses (i) to (iii).

Key evidence and findings:

The activities performed by the appellants were detailed in the impugned order. Upon scrutiny, these activities were not incidental or auxiliary to promotion, marketing, sale, or customer care services as per the unamended definition.

Application of law to facts:

Since the appellants' activities did not fall within the scope of BAS prior to 10.09.2004, they were not liable to pay service tax for that period under BAS.

Treatment of competing arguments:

The appellants argued that the SCN wrongly applied the amended definition retrospectively and that their activities pre-10.09.2004 were not taxable. The Revenue maintained the demand. The Tribunal sided with the appellants on this point.

Conclusions:

The appellants were not liable for service tax under BAS for the period before 10.09.2004.

Issue 2: Applicability of amended BAS definition w.e.f. 10.09.2004 and payment of service tax post amendment

Relevant legal framework and precedents:

The amended definition of BAS (effective 10.09.2004) broadened the scope by including procurement, production, processing, provision of services on behalf of the client, and incidental or auxiliary services related to these activities.

Court's interpretation and reasoning:

The Tribunal recognized that the appellants' activities fall within the amended definition of BAS post 10.09.2004. It also noted that the appellants had paid service tax for the period after the amendment, which was not properly credited or considered by the adjudicating authority.

Key evidence and findings:

Evidence showed service tax payments made by appellants post 10.09.2004 on multi service activities and miscellaneous income.

Application of law to facts:

The Tribunal found that the tax liability post amendment was acknowledged and discharged by the appellants, and thus the demand for that period requires recalculation considering the payments already made.

Treatment of competing arguments:

The appellants contended that the demand for post-amendment period was excessive and did not account for taxes already paid. The Revenue did not dispute the payments but maintained the demand. The Tribunal emphasized the need to consider these payments in de novo adjudication.

Conclusions:

The demand for the post-amendment period must be reassessed after accounting for taxes already paid by the appellants.

Issue 3: Service tax demand on miscellaneous income under Business Support Service (BSS) introduced w.e.f. 01.05.2006

Relevant legal framework and precedents:

The taxable entry for Business Support Service (BSS) was introduced w.e.f. 01.05.2006, covering certain miscellaneous incomes not previously taxable.

Court's interpretation and reasoning:

The appellants had paid service tax under BSS post 01.04.2006. The Tribunal noted that the impugned order did not adequately consider this fact in confirming the demand.

Key evidence and findings:

Records showed payment of service tax by appellants under BSS for the relevant period.

Application of law to facts:

The Tribunal held that since service tax was paid for the period after introduction of BSS, the demand for such income must be adjusted accordingly.

Treatment of competing arguments:

The appellants argued that the demand was unjustified as they had complied with tax obligations post 2006. The Revenue did not challenge the payments but sought to uphold the demand. The Tribunal favored the appellants' submissions.

Conclusions:

Service tax demand on miscellaneous income under BSS should be recalculated after considering taxes already paid.

Issue 4: Limitation and bar on demand in absence of suppression or willful misstatement

Relevant legal framework and precedents:

Limitation provisions under the Finance Act, 1994, bar recovery of service tax beyond the prescribed period unless there is suppression of facts or willful misstatement to evade tax.

Court's interpretation and reasoning:

The appellants contended that there was no suppression or willful misstatement, and hence the demand was barred by limitation. The Tribunal directed the original authority to consider limitation and related aspects afresh during de novo adjudication.

Key evidence and findings:

No evidence of suppression or fraud was found in the record.

Application of law to facts:

The Tribunal emphasized the necessity to apply limitation provisions strictly and to verify the absence or presence of suppression before confirming demand.

Treatment of competing arguments:

The Revenue did not specifically rebut the limitation argument. The Tribunal accordingly instructed reconsideration.

Conclusions:

The limitation aspect must be examined carefully in the fresh adjudication, and demand barred by limitation should not be confirmed.

Issue 5: Proper appreciation of statutory provisions and payments made by appellants

Court's interpretation and reasoning:

The Tribunal found that the adjudicating authority failed to properly appreciate the statutory definitions applicable during different periods and the payments made by appellants towards service tax. The entire demand was confirmed without due consideration of these factors.

Application of law to facts:

The Tribunal remanded the matter for de novo adjudication to quantify actual tax liability, considering applicable definitions, payments made, and limitation aspects.

Treatment of competing arguments:

The appellants' submissions on these points were accepted by the Tribunal for reconsideration.

Conclusions:

De novo adjudication is necessary to ensure correct application of law and facts.

3. SIGNIFICANT HOLDINGS

- "On reading of clause (iv) in the definition, it transpires that 'any incidental or auxiliary support service' mentioned therein in relation to clauses (i) to (iii) alone can be considered for the purpose of inclusion in the definition of BAS inasmuch as the said definition uses the expression 'means' and 'includes', thereby providing comprehensive meaning that only those services which are incidental or auxiliary to the services categorized at (i) to (iii), would only qualify for consideration."

- "The activities undertaken by the appellants upto the period 09.09.2004 were not covered under the definition of BAS, we are of the view that the appellants were not liable to pay any service tax under such taxable category."

- "The learned adjudicating authority has confirmed the entire demand, proposed for recovery in the SCN dated 21.04.2009, without proper appreciation of the statutory provisions vis-`a-vis the activities undertaken by the appellants."

- "The appellants' submission that they had paid the service tax for the period post 10.09.2004 on multi services activities and on the miscellaneous income, were also not considered in their proper perspective inasmuch as the benefit of tax amount already paid to the government has not been considered in the impugned order."

- "The matter should be remanded to the learned adjudicating authority for passing of de novo adjudication order, in quantifying actual tax liability, which was required to be paid by the appellants. While re-adjudicating the matter, the original authority should also consider the limitation and other aspects, which were raised by the appellants in the appeal filed before the Tribunal."

- "Needless to say that opportunity of personal hearing should be granted to the appellants before deciding the matter afresh."