In case of dispute regarding the coverage of service under Business Auxilliary Services Whether the penalty would be imposed on the assessee?

PJ/CASE LAW/2015-16/2666

Case-Bony Auto Links Versus Commissioner Of Central Excise, Rajkot

Citation-2014 (36) S.T.R. 113 (Tri. - Ahmd.)

Brief Facts-The facts of this case are that appellant is providing services relating to granting of loans for and on behalf of ICICI Bank.
This appeal has been filed by the appellant against OIA Nos. 514-515/Commr.(A)/CMC/Raj., dated 31-12-2010 issued on 4-1-2011. Under this OIA, inter alia, penalties under Sec. 76 & 78 of the Finance Act, 1994 were imposed and upheld. Appellant only appealed against the penalties imposed under Sec. 76 & 78 of the Finance Act, 1994 on the ground that appellant has paid the entire duty liability along with interest and have not charged the service tax from ICICI. Appellant vide their letter dated 29-1-2013, filed written submissions and waived the right of personal hearing. In the written submissions, appellant relied upon the following case laws:

(a)    Rajesh Auto Finance v. CCE, Rajkot [2012] 23 Taxmann Com 178 (Ahd. CESTAT) = 2013 (30)S.T.R.472 (Tri.-Ahmd.)
(b)    Marikar Motors Ltd. v. CCE,Thriuvananthapuram[2012] 21 Taxmann Com 405 (Bang.-CESTAT) = 2011 (23)S.T.R.458 (Tribunal)
(c)    South City Motors Ltd. v. Commissioner, Service Tax[2012] 17 Taxmann Com 38 (New Delhi - CESTAT) = 2012 (25)S.T.R.483 (Tribunal)

Appelants Contention-None appeared for the appellants

Respondents Contention-Shri P. N. Sarvaiya AR reiterated the stand taken by the adjudicating authority and the first appellate authority.Heard learned AR and perused the case records. It is seen from the facts of this case that appellant is providing services relating to granting of loans for and on behalf of ICICI Bank. Similar nature of services were also extended by the appellant in the case of South City Motors Ltd. v. Commissioner, Service Tax (supra) as is evident from Para 2 of the judgment relied upon by the appellant. While deciding this case, following observations were passed by CESTAT in Para 13 of that judgment.
“13. The period involved in this appeal is prior to 10-9-2004. The show cause notice was issued on 20-4-2006. This appellant is paying service tax from 10-9-2004. This matter relates to scope of the entry for “Business Auxiliary Services”. There was considerable doubt about its coverage because of the very nature of the entry. There are contrary decisions of the Tribunal in the matter. In most of the decisions like Bridgestone Financial Service and Roshan Motors Ltd., Tribunal has taken the view that it is a case involving interpretation of the taxing entry and no mala fide or element of suppression or mis-statement is involved. The Higher Courts have been taking the view that in such situations the extended period of time cannot be invoked for raising demand. In this case also the demand is raised beyond the time limit of one year and such demand cannot be sustained. However, demand if any, which is within the normal period of one year is sustainable. Interest is payable on such amount but no penalty is imposable”.

Reasoning Of Judgement-In view of the above, charging of appellant’s activities to service tax under Business Auxiliary Services was prone to different interpretations. Under the circumstances, once the entire amount of service tax along with interest was paid by the appellant and as the issue was disputed and prone to different interpretations, no motive can be assigned to the appellant to evade any service tax. Appellant, therefore, had a reasonable cause for not discharging duty liability in time due to disputable nature of the service. Therefore, it is a fit case for non-imposition of penalties under Sec. 76 & 78 as per the provisions of Sec. 80 of the Finance Act, 1994. Appeal filed by the appellant is accordingly allowed.

Decision-Appeal party allowed

Comment-The crux of the case is that when there is dispute and there are different interpretations regarding the coverage of services under Business Auxilliary Services then there is a reasonable ground for the assessee of not discharging the duty liability in time. This does not reflect the malafide intention of the assessee. Therefore, the penalty under Sec.76 & 78 is not imposable on the assessee even if the duty is not discharge by them in time as per the provisions of Sec. 80 of the Finance Act, 1994.

Prepared By-Neelam Jain

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PJ/CASE LAW/2015-16/2666

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