Appellant liable for service tax under BAS, penalties upheld, but exoneration granted. Demand sustained with interest.

The Tribunal confirmed the appellant's liability to pay service tax under the Business Auxiliary Service (BAS) for the period from 1.7.2003 to 31.12.2004. Penalties under Sections 76 to 78 of the Finance Act, 1994 were upheld due to the suppression of material facts by the appellant. However, the appellant was granted exoneration from penal liability under Section 80 of the Act. The demand for service tax and education cess with interest was sustained, while penalties were set aside in part.

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Issues:
1. Demand of service tax and education cess for the period from 1.7.2003 to 31.12.2004
2. Penalty imposed under Sections 76 to 78 of the Finance Act, 1994
3. Applicability of "Business Auxiliary Service" (BAS) to the activities of the appellant
4. Plea of limitation raised by the appellant
5. Benefit of Section 80 of the Act in relation to penal liability

Analysis:

1. Demand of service tax and education cess:
The appeal was against the demand of service tax and education cess for the period from 1.7.2003 to 31.12.2004. The appellant argued that they were only providing service on behalf of banks to the banks' customers and hence their activities were not taxable prior to 10.9.2004. However, the Revenue contended that the appellant was promoting/marketing the services of the banks and thus liable for service tax under the definition of BAS. The Tribunal found that the appellant was indeed marketing the services provided by the banks, falling within the definition of BAS since 1.7.2003. Therefore, the liability to pay service tax under BAS was confirmed for the entire period of dispute.

2. Penalty under Sections 76 to 78 of the Finance Act, 1994:
The appellant raised a plea of limitation, stating that they had disclosed their intention to pay service tax under BAS from 10.9.2004 in their registration application, and no material fact was suppressed. However, the Tribunal found that there was suppression of facts by the appellant during the extended period, justifying the invocation of the proviso to Section 73(1) of the Act. Consequently, the demand of service tax and education cess, along with penalties, was sustained.

3. Applicability of "Business Auxiliary Service" (BAS):
The Tribunal examined the terms and conditions of the Agreements entered into by the appellant with the banks, which showed that the appellant was marketing the products of the banks, falling within the definition of BAS. The activities of the appellant were considered to be marketing services provided by the banks, making them liable to pay service tax under the head BAS from the beginning of the dispute period.

4. Plea of limitation:
The appellant's plea of limitation was rejected as there was suppression of facts during the extended period. The Tribunal found that the appellant had not disclosed material facts before October 2004, justifying the invocation of the proviso to Section 73(1) of the Act.

5. Benefit of Section 80 of the Act:
The Tribunal acknowledged the appellant's belief that their liability to pay service tax under BAS arose under a specific clause of the definition. Considering the circumstances, including the appellant's registration and payment of service tax from 10.9.2004, the Tribunal found a valid ground for the appellant to claim the benefit of Section 80 of the Act. Thus, the appellant was granted exoneration from penal liability under this section.

In conclusion, the appeal was partly allowed by sustaining the demand of service tax and education cess with interest, while setting aside the penalties imposed on the appellant.

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