Business Auxiliary Service classification did not sustain tax demand where loan-facilitation commissions fell within applicable exemptions.

Commission received for arranging vehicle loans for financial institutions was classifiable as Business Auxiliary Service because the activity was performed on behalf of the client. The service nevertheless remained exempt for 01.07.2003 to 09.09.2004 under Notification No. 25/2003, and for 10.09.2004 to 31.03.2005 under Notification No. 14/2004, because the activity fell within the relevant exempted categories and the appellant, as a proprietary concern, was not within the excluded classes. The service tax demand was therefore not sustainable.

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Issues: Whether commission received for facilitating loans for financial institutions constituted Business Auxiliary Service, and if so, whether the appellant was entitled to exemption under Notification No. 25/2003 for 01.07.2003 to 09.09.2004 and under Notification No. 14/2004 for 10.09.2004 to 31.03.2005.

Analysis: The activity of arranging vehicle loans for customers on behalf of financial institutions was held to fall within Business Auxiliary Service, as it was performed on behalf of the client. However, the service was examined against the exemption notifications. For the first period, the service was covered by the exemption for services provided by a commercial concern on behalf of a client and related categories. For the later period, the appellant was a proprietary concern and did not fall within the excluded classes specified in the notification, so the benefit of the exemption remained available.

Conclusion: The commission receipts were liable to classification under Business Auxiliary Service, but the appellant was entitled to the benefit of both exemption notifications for the disputed periods; the service tax demand was not sustainable.

Ratio Decidendi: Even where a service is classifiable under Business Auxiliary Service, no tax demand can survive if the activity is specifically covered by the applicable exemption notification for the relevant period.

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