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of <h1>Appeal success: Technology company prevails in service tax dispute over Business Auxiliary Services</h1> <h3>UNITED TELECOMS LTD. Versus COMMISSIONER OF SERVICE TAX, HYDERABAD</h3> The appeal challenged a service tax demand against a company for services classified under Business Auxiliary Services (BAS). The company provided ... Demand of service tax - UTL provided services on behalf of the client i.e. Director, e-Seva and sustained the demand. We find that under BAS, there are seven sub-clauses - Demand under sub-clause (vii) could be on activities relatable to either one of the preceding six sub-clauses - Therefore, if a notice issued proposing demand under BAS, the noticee will not be aware as to the precise ground on which tax is proposed to be demanded from him unless the sub-clause is specified - In the instant case, service tax was proposed to be demanded for an activity under BAS and BSS - Under BSS also several activities are listed as exigible under that head - In the absence of proposal in the show-cause notice as to the liability of the assessee under the precise provision in the Act, find the demand to be not sustainable - Decided in favour of assessee. Issues:Classification of services under 'Business Auxiliary Services' (BAS) and 'Business Support Service' (BSS), liability for service tax, contractual obligations, demand confirmation, penalties imposition.Analysis:The appeal challenged an order sustaining a service tax demand against a company for providing services classified under BAS. The company had established an e-Seva Technology application system on a BOOT basis, facilitating various payments and services for the Andhra Pradesh State Government. The services included hardware procurement, networking, solution implementation, and maintenance. The Commissioner upheld the demand, considering the company as a commission agent providing services on behalf of the client, Director, e-Seva. The Commissioner (Appeals) observed confusion in the classification of services under BAS and BSS, leading to the demand confirmation.The company argued that the impugned activity did not fall under any specific sub-clause of the relevant Act, as it provided services to citizens without a direct contract with them. The appellate authority overlooked these arguments, stating that the company acted as a technology partner for e-Seva without a principal-agent relationship. The company sought to vacate the demand and penalties imposed.During the hearing, the appellants contended that the demand confirmation was based on a vague proposal in the show-cause notice, leading to confusion in the liability classification under BAS and BSS. The Tribunal noted that the Original Authority and the Commissioner had classified the activity under BAS and BSS, respectively. However, the lack of specificity in the show-cause notice regarding the precise provision for tax liability rendered the demand unsustainable.The Tribunal found that the demand confirmation without clear notice specifying the exact liability under the statute was not in accordance with the law. The confusion in classification under BAS and BSS, based on a vague proposal, led to the vacating of the demand and penalties imposed on the company. The appeal was allowed, and the decision was pronounced on 20-10-2010.
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