2008 (9) TMI 77 - AT - Service Tax

Tax Tribunal: Services to Transport Dept not Business Auxiliary Services. Waiver granted, emphasizing statutory vs. business activities.

The Tribunal held that the applicant's services to the Transport Department were related to statutory functions, not business activities. The services did ... Applicant has been engaged by the Transport Department of M.P. Govt. for computerization on ‘Boot basis’, their various activities like issuance of learner license, permanent driving licence, registration certificate for various vehicles etc. - services rendered are in relation to statutory functions carried out by the Government, hence, it is not taxable as Business Auxiliary Services – further, blank cards can’t be considered as an input in relation to the Government Department – stay granted Issues:Whether the activities of the applicant for the Transport Department amount to 'business auxiliary service' for the purpose of levying service tax under the head 'Business Auxiliary Services'Rs.Analysis:The applicant was engaged by the Transport Department of Madhya Pradesh Government for computerization on a 'Boot basis', including activities like issuance of licenses, permits, and certificates. The applicant imported blank smart cards, personalized them, and supplied them to the Transport Department for issuing authenticated documents. The original authority considered these activities as 'business auxiliary service' and imposed a significant service tax demand and penalties. The applicant argued that the functions of the Government Department are statutory and regulatory, not business activities, and therefore, they cannot be providing 'business auxiliary service'. They contended that the smart cards were not inputs for the Department and the processes involved did not amount to 'processing of goods'. The Joint CDR, however, argued that even if statutory functions are involved, the applicant's activities could still be classified as 'Business Auxiliary Services' as per Section 65(19)(iv).Upon careful consideration of the submissions and perusal of the agreement, the Tribunal acknowledged that the applicant was indeed providing services to the Transport Department. However, they opined that these services were related to the statutory functions of the Government and not necessarily business activities. The Tribunal also noted that the blank smart cards may not be considered inputs for the Department, and the processes involved in preparing them did not amount to processing of goods. Consequently, the Tribunal held that the applicant had established a prima facie case for waiving the amounts due as per the impugned order. As a result, the Tribunal granted a waiver of the pre-deposit and stayed the recovery until the appeal's disposal. Due to the significant implications of the case, the Tribunal directed the Registry to prioritize listing the case for a swift hearing on a specified date.This judgment highlights the distinction between statutory functions and business activities in the context of service tax liability, emphasizing the need for a nuanced understanding of the services provided in relation to government departments. The decision to waive the pre-deposit showcases the Tribunal's consideration of the prima facie case presented by the applicant and the potential impact of the tax demand on the appellant.