2016 (12) TMI 164 - AT - Service Tax

Tribunal Rules Appellant's Printing Services Not Taxable

The Tribunal ruled in favor of the appellant on both issues. It held that the printing services provided did not fall under Business Auxiliary Services, ... Business Auxiliary Service - incidental or auxiliary support service - Business Support Service - input service - Service Tax Credit Rules, 2002Business Auxiliary Service - incidental or auxiliary support service - Business Support Service - Classification of printing services provided by the appellant to the bank for the period 1-7-2003 to 31-3-2004 as Business Auxiliary Service under clause (iv) of Section 65(19) or otherwise. - HELD THAT: - The Tribunal held that the phrase 'incidental or auxiliary support service' in clause (iv) must be read in the context of clauses (i) to (iii); incidental or auxiliary services are ancillary to the main services specified in clauses (i)-(iii). The printing service in question does not relate to promotion/marketing/sale of goods, promotion/marketing of services, or customer care services and therefore cannot be considered incidental or auxiliary to those services. Even if clause (iv) were read independently, the printing service was found to be an independent service not properly characterised as incidental or auxiliary. The Bench noted authority holding similar activities to be classifiable as Business Support Service, a category which became taxable only w.e.f. 1-5-2006, and therefore the printing service for the period in question was not taxable as Business Auxiliary Service. Consequently, the confirmed demand, interest and penalties relating to the printing service were set aside.Demand of service tax (and consequential interest and penalty) on the printing service for the period 1-7-2003 to 31-3-2004 is not sustainable and is set aside.Input service - Service Tax Credit Rules, 2002 - Admissibility of service tax credit (Cenvat) on premiums paid for employees' insurance policies. - HELD THAT: - The Tribunal followed prior decisions of the Tribunal and High Courts which held that insurance of employees is a service used in providing the assessee's output services and thus qualifies as an input service under the Service Tax credit regime. Applying that ratio, the Bench held that the insurance policies taken for employees were for services received and consumed in relation to rendering the appellant's output services, and accordingly service tax credit on the insurance premium is admissible under the Service Tax Credit Rules, 2002.Service tax credit in respect of premiums on employees' insurance policies is admissible; the impugned order is modified to allow such credit.Final Conclusion: Appeal allowed in part: demand of service tax (with interest and penalty) on the printing service for 1-7-2003 to 31-3-2004 set aside; service tax credit on employees' insurance premiums allowed with consequential reliefs in accordance with law. Issues:1. Whether the printing services provided by the appellant to M/s. HDFC Bank Ltd. fall under Business Auxiliary Services Clause (iv) and are liable for service tax.2. Whether input service credit for service tax paid on the premium of insurance policies of employees is admissible under the Service Tax Credit Rules, 2002.Analysis:Issue 1:The appellant provided printing services to the bank, and the dispute arose regarding the classification of these services under Business Auxiliary Services. The Revenue contended that the printing services were covered under clause (iv) of Section 65(19) of the Act, which includes incidental or auxiliary support services. However, the appellant argued that printing services cannot be considered incidental or auxiliary to the services specified in clauses (i) to (iii) of the same section. The Tribunal analyzed the services provided by the appellant and concluded that printing services did not fall under Business Auxiliary Services. Referring to a judgment by the Andhra Pradesh High Court, similar services were classified as Business Support Services, which were not taxable during the relevant period. Therefore, the demand for service tax on printing services was set aside, along with penalties and interest.Issue 2:Regarding the admissibility of input service credit for the premium of insurance policies, the appellant argued that these policies were essential for the functioning of their business and should be considered input services under the Service Tax Credit Rules, 2002. The Tribunal considered various judgments, including those from different Tribunals and High Courts, which supported the view that insurance policies for employees are used in providing output services. Citing these precedents, the Tribunal allowed the service tax credit for insurance policies and modified the impugned order accordingly. The appeal was allowed with consequential relief, if any, as per the law.In conclusion, the Tribunal ruled in favor of the appellant on both issues, determining that the printing services were not taxable under Business Auxiliary Services and that the service tax credit for insurance policies was admissible. The decision was pronounced on 17/10/2016.