2015 (7) TMI 886 - HC - Service Tax

Court rules service center establishment by respondent for State not 'business auxiliary service' for tax liability.

Commissioner, Custom & Central Excise Versus M/s Smart Chip Limited

Commissioner, Custom & Central Excise Versus M/s Smart Chip Limited - 2015 (39) S.T.R. 197 (M. P.) Issues:- Tenability of the order passed by the Customs Excise and Service Tax Appellate Tribunal regarding the liability for service tax on activities carried out under a contract with the State of Madhya Pradesh.- Determination of whether the activities performed by the respondent assessee fall under the category of 'business auxiliary service' as per the provisions of the Finance Act, 1994.- Interpretation of the definition of 'business auxiliary service' under section 65(19) of the Finance Act, 1994 in the context of the services rendered by the assessee to the Transport Department under the Motor Vehicle Act.Analysis:The High Court examined the appeal challenging the order dated 2.12.2011 passed by the Customs Excise and Service Tax Appellate Tribunal. The Tribunal had ruled that the activities carried out by the respondent assessee under a contract with the State of Madhya Pradesh, specifically establishing service centers in different offices of the Transport Department, did not amount to 'business auxiliary service' liable for service tax. The Tribunal referenced a Delhi High Court decision and a circular from the Ministry of Finance to support its conclusion. The High Court noted that the work done by the assessee was related to the discharge of statutory functions under the Motor Vehicle Act and did not constitute activities like customer care, promotion, or marketing of services that are incidental to support services.In a similar case involving the preparation of voter identity cards, the Tribunal had previously held that such services did not qualify as 'business auxiliary service' under the Finance Act, 1994. The respondent's counsel presented an order from the Central Excise Tribunal in another case to support this argument. The High Court analyzed the definition of 'business auxiliary service' under section 65(19) of the Finance Act, 1994 and concluded that the services provided by the assessee to the Transport Department did not meet the criteria for being classified as 'business auxiliary service'. Therefore, the High Court found no error in the Tribunal's decision and dismissed the appeal, stating that no substantial question of law arose for consideration in this matter.Overall, the judgment focused on interpreting the scope of 'business auxiliary service' under the relevant legal provisions and applying it to the specific services rendered by the respondent assessee to determine the liability for service tax. The High Court's decision was based on a thorough analysis of the facts, legal definitions, and precedents, ultimately upholding the Tribunal's ruling in favor of the respondent.