2012 (8) TMI 49 - AT - Service Tax

Appellate Tribunal overturns Commissioner's order on Service Tax, remands for fresh decision

The Appellate Tribunal CESTAT, KOLKATA set aside the Ld. Commissioner's order on non-payment of Service Tax and Education Cess. The Tribunal remanded the ... Demand of service tax – alleged that assessee is holder of service tax registration and they did not pay Service Tax on taxable service viz. Banking & Other Financial Services and Business Auxiliary Services - assessee contended that the financial agreements of the assessee is not taxable under the Banking Financial Services (BFS) on the ground that as per the definition of BFS under section 65(12) the assessee has the option or is entitled to own the asset at the end of lease period - as per agreement they are the owner of the asset and there is no clause in the agreement which say that their clients had the option to purchase the asset on expiry of the lease agreement – Held that:- As a lot of factual verification was not done, expert consultation was not made any total demand has been drastically curtailed without adequate verification or analysis, the entire matter may be remanded for de novo adjudication - order set aside and matter remanded to the Original Authority Issues involved:Appeals against Ld.Commissioner's order regarding non-payment of Service Tax and Education Cess on taxable services, interpretation of financial agreements under Banking Financial Services (BFS), liability of Service Tax on hire purchase agreements, taxation of operating lease, gain on securitization, demand under Section 11D, vagueness in Show Cause Notice for Business Auxiliary Service (BAS), constitutional validity challenge affecting extended period invocation.Analysis:1. Non-payment of Service Tax and Education Cess:The assessee did not pay Service Tax and Education Cess on taxable services, leading to a Show Cause cum Demand Notice. The Ld.Commissioner confirmed a demand amount and imposed a penalty, which was appealed by both the Department and the assessee.2. Interpretation of financial agreements under BFS:The advocate for the assessee argued that the financial agreements should not be taxable under BFS as the conditions for financial lease were not met. They cited a Board clarification regarding agreements entered before a specific date. The contention also included the interpretation of hire purchase agreements as not liable to Service Tax.3. Liability of Service Tax on hire purchase agreements:The department's consultant contended that only Financial Lease (FL) and Hire Purchase (HP) were taxable, while Operative Lease (OL) was not. They highlighted discrepancies in the assessee's submissions regarding the nature of their business and statutory returns. The consultant emphasized the distinction between hire purchase and hire purchase finance based on legal interpretations and financial reporting.4. Taxation of operating lease and gain on securitization:The department argued that operating lease should not be liable to Service Tax. They also raised concerns about the calculation of taxable value, specifically related to gain on securitization, and the need for further factual verification and expert consultation.5. Demand under Section 11D and Business Auxiliary Service (BAS):The contentions included challenges to the demand under Section 11D, vagueness in the Show Cause Notice for BAS, and an alternate plea regarding the constitutional validity challenge affecting the invocation of the extended period for demand.6. Conclusion and Remand:After considering the submissions, the Tribunal decided to set aside the impugned order and remand the matter to the Original Authority for a fresh decision. The Tribunal referred to similar cases where matters were remanded for fresh adjudication due to legal and procedural concerns. Both parties were granted the opportunity to produce documents and present their arguments during the fresh adjudication process.This comprehensive analysis covers the various issues involved in the legal judgment delivered by the Appellate Tribunal CESTAT, KOLKATA, providing detailed insights into the arguments presented by the parties and the Tribunal's decision to remand the case for further consideration.