Whether services rendered by the assesseefacilitating their clients of timely receipt of various export incentives coveredunder BAS?

PJ/Case Law /2016-17/3311

Name:-JAK TRADERS PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, KANPUR

Citation :- 2016(43) S.T.R.259 (Tri.-All.)

Brief Facts:-The issue involved in this appeal is whether the appellant have rendered Business Auxiliary Services for the financial year 2004-2005. So far other financial years are concerned, covered by the show cause notice 2005-2006 to 2008-2009 the appellant have not disputed their liability and pointed out that they had paid the service tax and whatever shortfall was there, had been paid before the issue of show cause notice. It is admitted fact as recorded in the order-in-original, however, shortfall was paid after the initiation of enquiry by the Department. A show cause notice was issued dated 22-10-2009 for the extended period 2004-2005 to 2008-2009 alleging therein that the appellant is providing taxable services to their clients and collected the tax along with the value of service, but not deposited the same regularly in the Central exchequer. Accordingly, show cause proposed to adjudicate and collect the taxable amount of Rs. 50,84,581/- including cess with a further proposal to collect interest and impose the penalty under Sections 76, 77 and 78.

Appellant’s contention:-The appellant appeared and contested the show cause notice. They disputed their liability for the period 2004-2005 contending that the services provided by them, that is facilitating their clients in expeditious and/or timely receipt of various export incentives, and duty drawbacks, is not taxable. They are not providing any service relating to sale of any goods of their clients or service provided by the clients and as such they are not liable to tax under the Business Auxiliary Service head. The show cause notice was adjudicated by the order-in-original dated 29-3-2010 recording the finding that the appellant’s services certainly promoted and encouraged the sale of the goods of the clients and serves as the input in support of their business activity. Accordingly, the proposed demand was confirmed appropriating the pre-paid amount of Rs. 42,84,716/- and interest of Rs. 7,92,648/- along with further interest and further penalty was imposed of equal amount under Section 76 or @ Rs. 100/- per day for the period prior to 18-4-2006 and Rs. 200/- per day w.e.f. 18-4-2006 - whichever is higher and Rs. 1,000/- + Rs. 5,000/- under Section 77 and equal amount of penalty under Section 78 of Rs. 50,84,581/-. Being aggrieved by this order, the appellant appealed before the Tribunal.
So far the demand of other financial years i.e. 2005-2006 to 2008-2009 is concerned, it is pointed out from para 5 of the impugned order that there is no demand in the year 2006-2007. So far the differential tax demand for the year 2005-2006 is concerned, in para 13 of the order-in-original the payment had been recorded at page 12 of the order as having been paid by the challan dated 6-3-2010. So far demand for financial year 2007-2008 and 2008-2009 is concerned for the differential tax, in para 6, it is recorded that differential amount have been paid with interest on 24-9-2009. So far the demand for 2004-2005 is concerned for Rs. 7,99,864/-, the learned counsel had taken the Tribunal through the definition of Business Auxiliary Services during the relevant period. During the financial year, there is change in the definition w.e.f. 10-9-2004, wherein some services have been added. It is argued on behalf of the appellant that in spite of the amendment, the service provided by them does not fall under any of the categories (i) to (vii) under the Business Auxiliary Services head. Only on the basis of raising of their bill of services, i.e. 20% of the duty drawback or benefit received, their service cannot be classified under Business Auxiliary Services or any other category of taxable service. Accordingly, he prays for setting aside and at the same time as the service is not taxable, but tax has been suo motu paid along with interest, prays that no penalty under Sections 76, 77 and 78 is imposable and same are fit to be set aside.

Respondent’s contention:-The learned AR for the Revenue relies on the impugned order. Relying on the finding of the Commissioner and states that the clients of the appellant have been benefited by timely receipt of their claims under the various exports schemes, whereby encouraging their business and accordingly tax is rightly levied on the appellant.

Reasoning of judgement:-Having considered both the submissions, the Tribunal found that in the admitted fact and circumstances, the service provided by the appellant does not fall under any of the sub-clauses (i) to (vii) of Section 65(19) under the head Business Auxiliary Services. The Tribunal took notice of the fact that the appellant have neither facilitated sale of any goods of their client nor service. It is admitted fact that the appellants are not involved in any activity directly relating to promoting or marketing of goods. The appellants provided services like filing drawback claims, filing application for DEPB, EPCG licences, processing application for Star Export House Certificate etc. The reasoning given by the Original Authority for tax liability is that appellants’ services certainly promoted and encouraged the sale of goods of the clients and served as inputs in support of their business and export activities. Considering the nature and scope of services rendered by the appellants, the Tribunal found no support for such finding. In fact, in respect of drawback the appellants’ role comes after the goods were sold and exported. The Tribunal found that the scope of Business Auxiliary Services does not cover the activities of appellants as they do not deal with promotion or marketing of goods or services. There is no incidental or auxiliary service to such marketing. Accordingly the Tribunal set aside the impugned order. It also set aside the penalties imposed under Sections 76, 77 and 78 of the Act.

Decision:- Appeal allowed

Comment:-The gist of the case is that the assessee was facilitating their clients in timely receipt of various export incentives. He neither facilitated sale of any goods of their client or service and nor was involved in any activity directly relating to promoting or marketing of goods. Services provided by the appellant were like filing drawback claims, filing application for DEPB, EPCG licences etc. in which appellants’ role comes after the goods were sold and exported. Thus, the scope of Business Auxiliary Services does not cover the activities of the assessee.

Prepared by:- Praniti Lalwani

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PJ/Case Law /2016-17/3311

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