2008 (6) TMI 94 - AT - Service Tax

Tribunal upholds Service tax demand on business services to banks, denies waiver request

The Tribunal confirmed the demand for Service tax on the applicant, considering them as providers of Business Auxiliary Service to banks. The applicant's ... Business Auxiliary Service - service tax liability for intermediary introducing customers - waiver of pre-deposit - commission received as considerationBusiness Auxiliary Service - service tax liability for intermediary introducing customers - commission received as consideration - waiver of pre-deposit - Applicants provide Business Auxiliary Service to banks and are liable to pay service tax; waiver of pre-deposit of service tax denied while pre-deposit of penalties waived on compliance. - HELD THAT: - The Tribunal found that the applicants, who arrange finance/loans by introducing customers to banks and receive commissions (part of the processing fee charged by banks), are providing a service to the banks and not merely to the customers. Applying authority in Malpani Finance v. Commissioner of Central Excise, Bhopal and Commissioner of Central Excise, Jaipur v. R.S. Financial Services, the Tribunal held that in such circumstances the activity constitutes Business Auxiliary Service and attracts service tax. Consequently, the applications for waiver of pre-deposit of the service tax demand were refused. The Tribunal directed deposit of the entire service tax demand (noting the amount as the amount before it) within eight weeks, and provided that on deposit of the said service tax amount the pre-deposit of the penalties would be waived for admission of the appeal.Deposit the full service tax demand within eight weeks; pre-deposit of penalties waived upon such deposit; waiver of pre-deposit of service tax refused.Final Conclusion: The appeal applications for waiver of pre-deposit of the service tax demand were rejected because the appellants were held to be providers of Business Auxiliary Service and liable to service tax; the appellants were directed to deposit the specified service tax amount within eight weeks, and on such deposit the pre-deposit of penalties was waived. Issues:1. Whether the applicant is liable to pay Service tax as a provider of Business Auxiliary Service.2. Whether the applicant's contention of not providing service to banks or financial institutions but to customers is valid.3. Whether the applicant's request for waiver of pre-deposit of Service tax and penalties should be granted.Analysis:Issue 1: Liability to pay Service tax as a provider of Business Auxiliary ServiceThe Tribunal confirmed the demand for Service tax on the applicant after considering them as providers of Business Auxiliary Service. The Tribunal referred to previous judgments, such as Malpani Finance v. Commissioner of Central Excise and Commissioner of Central Excise v. R.S. Financial Services, where it was held that in similar situations, the assessee is providing Business Auxiliary Service to banks for consideration, thus making them liable to pay Service tax. The Tribunal concluded that the applicant falls under the category of providing Business Auxiliary Service and therefore is required to pay the Service tax.Issue 2: Validity of the applicant's contentionThe applicant argued that they are not providing service to banks or financial institutions but to customers by introducing them to banks, and the commission received is part of the processing fee charged by the banks. However, the Tribunal rejected this argument based on the established precedent that in such cases, the service provided by the applicant is considered as Business Auxiliary Service to the banks. The Tribunal emphasized that the consideration received by the applicant from the banks for promoting loans and finance schemes qualifies as providing a taxable service.Issue 3: Request for waiver of pre-deposit of Service tax and penaltiesThe applicant filed applications for the waiver of pre-deposit of the total amount of Service tax and penalties. However, the Tribunal, based on its findings regarding the nature of services provided by the applicant and the liability to pay Service tax, ruled that it was not a fit case for the waiver of the Service tax amount. The Tribunal directed the applicant to deposit the entire Service tax amount within a specified period and waived the pre-deposit of penalties for the appeal hearing upon compliance with the payment deadline.In conclusion, the Tribunal upheld the demand for Service tax on the applicant, considering them as providers of Business Auxiliary Service to banks. The applicant's contention of providing services to customers rather than banks was dismissed, and the request for waiver of pre-deposit of Service tax and penalties was denied, with specific instructions for compliance with the payment deadline.