Incidental or auxiliary service exemption applied to authorised lead agency functions, defeating service tax demand and penalties.

Activities performed as an authorised lead agency for computer education were treated as incidental or auxiliary to the client's service activity and therefore fell within Notification No. 14/2004-Service Tax. Coordination with training centres, ensuring course infrastructure and conduct, collecting and remitting fees, and handling publicity were accepted as functions covered by clause (d) of the notification. The exemption was held applicable, so the service tax demand and penalties were unsustainable. The document also notes that exemption claims are examined strictly at the threshold, but once coverage is established, the notification is construed liberally.

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Issues: Whether the appellant's activities as an authorised lead agency for computer education courses were covered by Notification No. 14/2004-Service Tax dated 10.09.2004 as a service incidental or auxiliary to the provision of service on behalf of the client, and therefore not liable to service tax under the category of Business Auxiliary Service.

Analysis: The appellant coordinated with authorised training centres, ensured prescribed course conduct and infrastructure, collected fees and remitted them to the client, and undertook related publicity and promotion. These functions were found to be incidental or auxiliary to the client's service activity and to fall within clause (d) of the exemption notification. The notification was applied on the principle that exemption claims are strictly examined at the threshold, but once coverage is established, the notification must receive a liberal construction.

Conclusion: The appellant's activities were held to be covered by the exemption notification, and the denial of exemption was unsustainable. The demand and penalties were set aside, and the appeals were allowed.

Ratio Decidendi: Where a service is incidental or auxiliary to the client's service activity and falls within the terms of an exemption notification, the notification is to be construed liberally once threshold eligibility is established.

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