2017 (3) TMI 1159 - AT - Service Tax

Tribunal rules printing telephone bills not subject to service tax under Business Auxiliary Service

The Tribunal overturned the order confirming service tax liability for bill printing service under Business Auxiliary Service (BAS), ruling that printing ... Business auxiliary service - billing - service tax liability - incidental or auxiliary service - provision of service on behalf of the client - principal-to-principal contractBusiness auxiliary service - billing - incidental or auxiliary service - provision of service on behalf of the client - Whether the appellant's activity of printing telephone bills and performing specified post-printing operations amounts to 'billing' and is taxable as a business auxiliary service. - HELD THAT: - The Tribunal held that the appellant was engaged essentially in physical printing of preformatted telephone bills and post-printing tasks (sorting, folding, stuffing into covers and bundling) based on data supplied by the telecom companies, and did not perform activities constitutive of telecom billing. Telecom billing, the court observed, includes collection of consumption data, computation/quantification of charges, preparation of bill details, issuance to customers and follow-up for collection. The appellant neither participated in computation or verification of bill details nor bore responsibility for the contents or authenticity of the bills; it merely executed printing and packaging under a contract with the telecom companies. Sub-clause (vii) of the definition of business auxiliary service applies only to services incidental or auxiliary to activities specified in sub-clauses (i)-(vi), which concern promotion/marketing, customer care or provision of services on behalf of the client. The appellant's services were not in aid of promotion, marketing or provision of the client's services nor were they performed on behalf of the client vis-a -vis the client's customers. The contractual relationship was on a principal-to-principal basis with no contractual nexus between the appellant and the telecom customers. On these foundations the Tribunal concluded that the activities do not qualify as 'billing' under the business auxiliary service definition and thus are not exigible to service tax as BAS. [Paras 4]Printing and the specified post printing operations do not constitute 'billing' within the meaning of business auxiliary service and are not taxable as BAS.Final Conclusion: The impugned order confirming service tax liability is set aside; the appeal of the appellant/assessee is allowed and the Revenue's appeal is dismissed. Cross objection disposed of. Issues:Service tax liability for bill printing service under Business Auxiliary Service (BAS) - Interpretation of statutory definition of Business Auxiliary Service - Application of sub-clause (vii) - Whether printing of telephone bills qualifies as 'billing' - Whether appellant/assessee's activities fall under BAS.Analysis:The judgment pertains to appeals against an order confirming service tax liability for providing bill printing service to telecom companies under Business Auxiliary Service (BAS). The Revenue contended that the activities are taxable under BAS as per Section 65 (19) of the Act. The Original Authority imposed penalties under Section 76 and 77 of the Act. The appellant/assessee challenged the service tax liability, while the Revenue appealed against dropping of demand for an extended period and non-imposition of penalty under Section 78 of the Finance Act, 1994.The Tribunal analyzed the terms of the contract between the appellant/assessee and a telecom company, which included printing telephone bills and post-printing activities like sorting, bundling, and dispatching bills. The statutory definition of Business Auxiliary Service under Section 65 (19) was examined, particularly sub-clause (vii) which includes activities such as billing. The Original Authority's interpretation of 'billing' as printing and dispatching bills was deemed unsustainable by the Tribunal. It was observed that the appellant/assessee's role was limited to physical printing of bills based on data provided by the telecom company, without involvement in quantification or calculation of bill details.The Tribunal noted that the appellant/assessee's activities did not align with the essence of business auxiliary service, which involves promotion, marketing, or provision of services on behalf of the client. The judgment highlighted a previous Tribunal order that printing and delivering bills to the client does not constitute business auxiliary service. Ultimately, the Tribunal set aside the impugned order, allowing the appeal filed by the appellant/assessee and dismissing the Revenue's appeal. The Cross Objection by the appellant/assessee was also disposed of, with the judgment pronounced on 22/03/2017 by the Tribunal.This detailed analysis showcases the Tribunal's thorough examination of the contractual terms, statutory provisions, and the nature of the appellant/assessee's activities to determine the applicability of service tax liability under Business Auxiliary Service. The judgment emphasizes the distinction between 'billing' activities and business auxiliary services, ultimately leading to the setting aside of the impugned order and a favorable decision for the appellant/assessee.