2008 (6) TMI 70 - AT - Service Tax

Applicants Liable for Service Tax on Business Services, Limitation Barred, Pre-deposit Ordered

The Tribunal held that the applicants were liable to pay service tax for providing Business Auxiliary Services, rejecting the argument that their ... Contention of the applicants that they are not rendering any Auxiliary Business Services as their activity amounts to manufacture which is excluded from the purview of Business Auxiliary Services, is not tenable – submission that goods manufacturer attract sales tax hence not treatable as service, is very contentious issue - prima facie it is not factually correct to hold that they had suppressed their activity by not obtaining the Service Tax registration – stay partly granted Issues:1. Whether the applicants are liable to pay service tax on the grounds of providing Business Auxiliary Services.2. Whether the demand raised in the show cause notices is barred by limitation.3. Determination of the pre-deposit amount and waiver of balance service tax and penalty pending appeal.Analysis:1. The judgment addresses the issue of whether the applicants are liable to pay service tax for providing Business Auxiliary Services. The Tribunal noted that the applicants' activities, involving the production of products containing alcohol covered under State Excise duty, could be categorized as rendering services falling under Business Auxiliary Services. The contention that their activities amount to manufacturing, excluded from Business Auxiliary Services, was deemed prima facie untenable. The Tribunal highlighted that only manufacturing of goods liable to Central Excise duty is excluded from the purview of Business Auxiliary Services. The argument that the goods produced attract sales tax and thus cannot be considered services was considered a contentious issue requiring further examination during the final hearing.2. The judgment also delves into the issue of limitation regarding the demands raised in the show cause notices. The Tribunal found merit in the applicants' submission that the demand raised in the notice covering the period from September 2004 to June 2006 was barred by limitation. This was based on the fact that the applicants had obtained Service tax registration in September 2004, surrendered it in June 2005, and thus, it was not accurate to claim suppression of activity by not obtaining the registration. However, the demand of service tax for a different period was considered prima facie payable, pending further examination on merits.3. Lastly, the Tribunal determined the pre-deposit amount and the waiver of the balance service tax and penalty pending appeal. The applicants were directed to make a pre-deposit of Rs. 25 lakhs within eight weeks, following which the pre-deposit of the remaining service tax and penalty would be waived, and the recovery stayed during the appeal process. Failure to comply with this direction would lead to the vacation of the stay and dismissal of the appeal without prior notice. Compliance was required to be reported by a specified date.This comprehensive analysis of the judgment provides a detailed understanding of the issues involved and the Tribunal's findings and directions on each aspect of the case.