2014 (8) TMI 1200 - HC - Service Tax

Tribunal Error: Exclusion of Information Technology Service from Business Auxiliary Service

The High Court held that the Tribunal erred in not considering the specific exclusion of 'Information Technology Service' from 'Business Auxiliary ... Business Auxiliary Services - selling products/packages for operation of computer systems and to motivate other associate for awareness of computer educational packages - period from July, 2003 to March, 2007 - HELD THAT:- The Explanation to Section 65(19) of Finance Act, 1994 provides that the Information Technology Service means any service in relation to designing, developing or maintaining of computer software or computerized data processing or system networking or any other service primarily in relation to operation of computer systems. As per the definition of Business Auxiliary Service, the activity of Information Technology Service is excluded therefrom and, therefore, it is not exigible to service tax. The Tribunal had failed to consider the following expression used in the Explanation “or any other service primarily in relation to operation of computer systems”. According to the Learned Counsel for the appellant, the activity of the assessee falls in this expression. Thus, it would be appropriate that the matter is remitted to the Tribunal to adjudicate the same and record a finding as to whether the activity of the assessee falls under the expression “or any other service primarily in relation to operation of computer systems” and termed to be ‘Information Technology Service’ or not. The matters are remitted to the Tribunal to decide afresh in accordance with law after affording an opportunity of hearing - Appeal allowed by way of remand. Issues Involved:Interpretation of 'Business Auxiliary Service' under the Finance Act, 1994 in relation to 'Information Technology Service' and the applicability of service tax.Detailed Analysis:Issue 1: Interpretation of 'Business Auxiliary Service' and 'Information Technology Service'The appellant filed an appeal under Section 35G of the Central Excise Act, 1944 against a demand for service tax as a Gold Diplomant Associate of a company, selling computer educational packages. The show cause notice demanded service tax for the period from 1-7-2003 to 31-3-2007 under the category of 'Business Auxiliary Service.' The appellant contended that the activity was exempt as 'Information Technology Service' based on an explanation added to the Finance Act, excluding Information Technology Service from Business Auxiliary Service. The Tribunal partly allowed the appeals filed by both the revenue and the assessee, leading to the present appeal.Issue 2: Applicability of Service TaxThe Tribunal's order was challenged by the appellant, arguing that the activity carried out was not a Business Auxiliary Service but rather an Information Technology Service. The appellant emphasized the terminology used in the explanation to Section 65(19) of the Finance Act, which excludes Information Technology Service from Business Auxiliary Service. The Tribunal's failure to consider this expression was highlighted, leading to prejudice against the appellant. The Tribunal's decision was based on the promotion and marketing activities carried out by the appellant, concluding that they were providing Business Auxiliary Service and not Information Technology Service.Judgment:The High Court held that the Tribunal had erred in not considering the expression 'or any other service primarily in relation to operation of computer systems' in the explanation to Information Technology Service. The matter was remitted to the Tribunal for a fresh decision after affording an opportunity of hearing to both parties. Consequently, all the appeals were allowed, the Tribunal's orders were set aside, and the matters were remitted for fresh adjudication in accordance with the law.