CESTAT, BANGALORE BENCH
Commissioner of Central Excise, Mangalore
FINAL ORDER NO. 483 OF 2012
APPEAL NO. ST/297 OF 2006
JULY 19, 2012
P.G. Chacko, Judicial Member
This appeal filed by the assessee is directed against demand of service tax and education cess totaling to Rs. 55,362/- for the period from 1.7.2003 to 31.12.2004 as also against the penalty imposed on them under Sections 76 to 78 of the Finance Act, 1994. The demand of service tax is under the head “Business Auxiliary Service” (BAS). The appellant got themselves registered under this head and paid service tax from 10.9.2004 and the amount so paid stands appropriated towards the above demand. The case of the appellant, which is based on the terms and conditions of their Agreements with ICCI Bank Ltd. and HDFC Bank Ltd., is that they were only providing a service on behalf of the banks (clients) to the latter’s customers and hence the activity was not taxable prior to 10.9.2004, the date on which “Provision of Service on behalf of the client” was enacted as a part of the definition of BAS under Section 65(19) of the Act. Per contra, the case of the Revenue is that the appellant was promoting/marketing the services of the Banks and hence the activity was squarely covered by clause (ii) (promotion or marketing of service provided by the client) of Section 65(19) ibid. The clause (ii) was a part of the definition of BAS from the very beginning (1.7.2003) and hence, according to the Revenue, the activities of the appellant were exigible to service tax under clause (ii) of Section 65(19) of the Act for the entire period of the dispute (1.7.2003 to 31.3.2012). The learned counsel for the appellant and the learned Additional Commissioner (AR) put forward their respective arguments. The learned Additional Commissioner (AR) has relied on the Tribunal’s decision in the case of Peoples Automobiles Ltd. v. CCE Final order nos. ST/473-474/2011, dated 18-8-2011.
2. Apart from merits, the plea of limitation has also been raised by the learned counsel who submits that the intention of the appellant to pay service tax under BAS from 10.9.2004 had been categorically stated in their application for registration and no material fact was suppressed and, therefore, the extended period of limitation was not invocable in this case. In this connection, it is further submitted that only the demand for the period from April 2004 is within the normal period of limitation. Further, it is submitted that, though in the appellant the appellant has claimed refund of the service tax paid for the period from 10.9.2004, the claim is not pressed at this stage. The learned counsel has also made a fervent plea for vacating the penalties on the ground that, in the facts and circumstances of this case, the appellant is entitled to the benefit of Section 80 of the Act.
3. We have perused the records and considered the submissions. The terms and conditions of the relevant Agreements show that the appellant was, in fact, using their infrastructure, staff and expertise to market products of the Banks. In both the Agreements, the appellant was referred to as “Direct Sales Association/Agent”. After a study of the functions assigned to the appellant under the Agreements, we have found this name of the appellant to be befitting in the sense that the appellant was, in fact, selling products of the Bank. The products of the Banks were nothing but “Banking services”. Therefore, ex facie , the appellant was marketing the services provided by their clients, viz. banks. In other words, their activities squarely fell within the ambit of “promotion or marketing of services provided by client” which function was a part of the definition of BAS since 1.7.2003. In the result, the liability of the appellant to pay service tax under the head “BAS” in terms of clause (ii) of the definition of this service under Section 65(19) of the Act during the entire period is undeniable. Therefore, the plea that the appellant was liable to pay service tax only from 10.9.2004 in terms of clause (vi) of the definition of BAS is not acceptable. If they paid service tax from that date, that was a payment under the head BAS and, on the facts of the case, that payment shall be deemed to have been made in terms of clause (ii) of the definition.
4. The plea of limitation raised by the appellant has also been examined. It is their submission that they did not suppress any material facts but disclosed the material facts to the department through their application for registration in October 2004. Obviously, there was no disclosure of material facts before October 2004. In other words, during the extended period, there was suppression of facts by the appellant, which justified invocation of the proviso to Section 73(1) of the Act. In the result, the entire demand of service tax and education cess confirmed against the appellant has to be sustained. It is ordered accordingly.”
5. However, we have found a point in the submissions of the learned counsel with reference to Section 80 of the Act. The appellant seems to have believed, on the basis of the terms and conditions of the Agreements, that their liability to pay service under BAS arose under clause (vi) of the definition of this service. It is not in dispute that they got themselves registered with the department and paid service tax under BAS from 10.9.2004, the date on which clause (vi) became a part of the definition. It is also on record that the appellant invoked the “Extra-ordinary Taxpayer-Friendly Scheme” introduced in September 2004. They invoked this scheme in October 2004 with a view to avoid penal liability. In the totality of these circumstances there appears to be a valid ground for the appellant to claim the benefit of Section 80 ibid, where under, if reasonable cause for non-payment of tax was shown to exist, penal action could be averted. We are of the view that such reasonable cause existed in this case. Consequently the appellant can claim exoneration from penal liability.
6. In the result, we allow this appeal partly by sustaining the demand of service tax and education cess with interest thereon and setting aside the penalties. The impugned order shall stand modified to this effect.