Case Law Details
Preet Financial Services Pvt. Ltd. Vs C.S.T.-Service Tax (CESTAT Delhi)
Business model of the appellant was such that they used to get commission from financial institutes for introducing customers. The said financial institutes used to pay commission in a fixed percentage on the loan amount disbursed to the end customer. After this commission, the appellant used to pass on substantial portion thereof to end consumer. When these facts are applied to the definition of Business Auxiliary Services (BAS) as under Section 65 sub-section 19 of Finance Act incorporated vide Notification No. 7/2003-Service Tax dated 20.05.2003 w.e.f. 01.07.2003, we are of the opinion that the nature of above activity of the appellant is promotion on marketing of the services provided by the client. The same very much falls under sub Clause (ii) of 65(19) of the Act. The appellants actually were sourcing customers for the above mentioned banks. The actual agencies which provide the financial service by giving loans are those banks. They are actually the clients of the appellants. Thus, the services of the appellants were very much that in the nature of Business Auxiliary Services.
It is an admitted and apparent fact that since 01.07.2003, the appellant has not discharged the liability. They only got themselves registered under Business Auxiliary Services on 25.10.2004 but the simultaneous fact remains that during the said period (since 01.07.2003 to 10.09.2004), there was a prevalent confusion about the nature of the impugned activities. We have perused the Notification of 06.11.2006 as has been brought to our notice by the Ld. Counsel of the appellant. The perusal thereof makes it clear that since the incorporation of Business Auxiliary Services till the date of this Notification, there were doubts in respect of the activities undertaken by various dealers promoting market for the financial institutes.
In the present case also, the demand is for the period w.e.f. July 2003 to December 2004. The Show Cause Notice was issued on 31.07.2007.
Once there was an apparent acknowledged confusion about the impugned activity, non-discharge of the liability thereof cannot be alleged as an act of suppression of fact with an intent to evade tax. Resultantly, the Department was not entitled to invoke the extended period of limitation. The demand in question therefore is hit being barred by time.
FULL TEXT OF THE CESTAT JUDGMENT
The appellant herein was acting as a car loan marketing agent for several banks and thus was engaged in the business of car finance. On an intelligence gathered, the Department noticed that during the period w.e.f. July 2003 to December 2004, the appellant has rendered the above services to ICICI Bank and Standard Chartered Bank but they neither were registered with the Service Tax Commissionerate nor did they make payment of service tax which was due on them on the amount received from both the said banks as commission totalling to Rs. 2,47,38,441/-. Though during the course of investigation itself the appellant obtained a service tax registration on 25.10.2004 for Business Auxiliary Service and have since then started paying the service tax. However, for the aforesaid amount tax liability of Rs. 20,75,821/- was alleged to not have been discharged by the appellant. The same was raised vide the Show Cause Notice No. 3748 dated 31.07.2007. The said demand was confirmed by the Order of original Adjudicating Authority dated 31.05.2011. Being aggrieved, an Appeal before Commissioner(Appeals) was filed who vide Order dated 13.09.2013 has upheld the findings of lower Adjudicating Authority. Resultantly, the Appeal in hand.
2. We have heard Mr. Nikhil Gupta/ Sumit K. Batra, Ld. Advocates for the appellants and Mr. Sanjay Jain, Ld. DR for the Department.
3. It is submitted on behalf of the appellant that since the Business Auxiliary Services came into tax net only w.e.f. 01.07.2003 which was later amended w.e.f. 10.09.2004 in the Finance Act but due to this an ambiguity regarding applicability and chargeability of service tax credit continued till a clarification by the Department vide a Circular No. 87/05/2006-ST dated 06.11.2006 came into existence. It is impressed upon that the appellant did not get himself registered nor discharged his liability because the services called as Business Auxiliary Services were not taxable prior July, 2003 and due to the confusion for the another one year the appellant was under bonafide belief of him not being liable to pay tax. The allegations of suppression as raised by the Department are therefore not sustainable. Resultantly, the Department was not entitled to invoke the extended period of limitation. The entire demand, as confirmed, is hit by the principle of limitation being beyond a period of one year. The same is liable to be set aside. The Adjudicating Authority below despite the submissions of the appellant has failed to take into consideration the said Circular. The Orders are accordingly prayed to be set aside and Appeal is prayed to be allowed.
4. While rebutting these arguments, Ld. DR though has fairly conceded to the clarificatory Circular of November 2006 however has still justified the Order under challenge on the ground that the services rendered by the appellant are apparently and admittedly the one as classifiable under Business Auxiliary Services. Hence, the liability to be discharged is not in dispute. Once this is the situation, the Circular as impressed upon by the appellant is of no significance to extend him the benefit. The non-payment of service tax, in the given circumstances, is impressed upon as nothing but an act of the appellant with an intention to evade tax. Resultantly, the extended period of limitation was rightly been invoked and the demand has rightly been confirmed. Appeal is prayed to be set aside.
5. After hearing both the parties and perusing the record, we are of the opinion that the business model of the appellant was such that they used to get commission from financial institutes for introducing customers. The said financial institutes used to pay commission in a fixed percentage on the loan amount disbursed to the end customer. After this commission, the appellant used to pass on substantial portion thereof to end consumer. When these facts are applied to the definition of Business Auxiliary Services as under Section 65 sub-section 19 of Finance Act incorporated vide Notification No. 7/2003 dated 20.05.2003 w.e.f. 01.07.2003, we are of the opinion that the nature of above activity of the appellant is promotion on marketing of the services provided by the client. The same very much falls under sub Clause (ii) of 65(19) of the Act. The appellants actually were sourcing customers for the above mentioned banks. The actual agencies which provide the financial service by giving loans are those banks. They are actually the clients of the appellants. Thus, the services of the appellants were very much that in the nature of Business Auxiliary Services.
6. It is an admitted and apparent fact that since 01.07.2003, the appellant has not discharged the liability. They only got themselves registered under Business Auxiliary Services on 25.10.2004 but the simultaneous fact remains that during the said period (since 01.07.2003 to 10.09.2004), there was a prevalent confusion about the nature of the impugned activities. We have perused the Notification of 06.11.2006 as has been brought to our notice by the Ld. Counsel of the appellant. The perusal thereof makes it clear that since the incorporation of Business Auxiliary Services till the date of this Notification, there were doubts in respect of the activities undertaken by various dealers promoting market for the financial institutes. The said Circular was taken note of by the Tribunal in the case of Maheshwari Bajaj Vs. C.C.E., Ahmedabad 2010 (19) S.T.R. 905 (Tri.-Ahmd.) wherein it was held as follows:-
As is clear from the Circular 06.11.2006, there was doubt in the field as regards coverage of above activity under category of Business Auxiliary Service. The same stand clarified by the Board’s Notification dated 06.11.2006. Inasmuchas , the period is much earlier to the issuance of said Circular and the Show Cause Notice stand issued on 24.07.2008, the demand is required to be held as barred by limitation.
7. In the present case also, the demand is for the period w.e.f. July 2003 to December 2004. The Show Cause Notice was issued on 31.07.2007. Once there was an apparent acknowledged confusion about the impugned activity, non-discharge of the liability thereof cannot be alleged as an act of suppression of fact with an intent to evade tax. Resultantly, the Department was not entitled to invoke the extended period of limitation. The demand in question therefore is hit being barred by time. Irrespective of the liability of the appellant for rendering the Business Auxiliary Services but due to the above discussion for impugned demand to be hit by the period of limitation we hereby hold that the impugned demand is not sustainable. The Adjudicating Authorities below are observed to have failed to appreciate the various decisions on this issue as in the case of Modern Machinery Store Vs. C.C.E., Jaipur-I 2008 (12) S.T.R. 162 (Tri.–Del.), Raj Auto Centre Vs. C.C.E., Ahmedabad-II 2009 (14) S.T.R. 327 (Tri.–Ahmd.) and Vipul Motors (P) Ltd. Vs. C.C.E., Jaipur-II 2008(9) S.T.R. 220 (Tri.–Del.). We therefore set aside the Order under challenge. As a result, the Appeal in hand is hereby allowed.
Source- Preet Financial Services Pvt. Ltd. Vs C.S.T.-Service Tax (CESTAT Delhi); Service Tax Appeal No. ST/59639/2013 [DB]; 06/09/2018
