Printing electoral rolls and cards classified as Business Auxiliary Services not Information Technology Services under service tax

CESTAT Allahabad ruled that appellant's services of printing voter electoral rolls and cards as sub-contractor to UPDESCO were correctly classifiable under Business Auxiliary Services, not Information Technology Services. The tribunal rejected appellant's contention that sub-contractors are exempt from service tax liability when main contractors pay tax, citing precedent. Extended period of limitation and Section 78 penalties were not upheld due to insufficient grounds. Section 76 penalty for pre-09.05.2008 period was deemed time-barred. Appeal partially allowed; matter remanded for re-computation of demand under normal limitation period per Section 73.

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Issues Involved:
1. Classification of Services
2. Liability of Sub-Contractor for Service Tax
3. Invocation of Extended Period of Limitation
4. Penalty under Section 76 and 78

Summary:

1. Classification of Services:
The primary issue was whether the services provided by the appellant-assessee should be classified under "Business Auxiliary Service" (BAS) or "Information Technology Services" (ITS). The appellant argued that their services, including printing of voter electoral rolls and voter cards, were ITS and not BAS. However, the Tribunal upheld the classification under BAS, citing that the services provided by the appellant to UPDESCO and UPELC were on a commission basis and fit the definition of BAS as per Section 65(19) of the Finance Act, 1994.

2. Liability of Sub-Contractor for Service Tax:
The appellant contended that as a sub-contractor, they were not liable to pay service tax if the main contractor (UPDESCO/UPELC) had already paid it. This argument was rejected based on the Larger Bench decision in Melange Developers P. Ltd., which clarified that sub-contractors are liable to pay service tax independently, and any tax paid can be availed as credit by the main contractor.

3. Invocation of Extended Period of Limitation:
The Tribunal found that the demand for service tax was barred by the extended period of limitation. It noted that the issue involved interpretation of law and bona fide belief regarding service tax liability. Citing the decision in Vinoth Shipping Services and other precedents, the Tribunal held that the extended period could not be invoked, and the demand should be limited to the normal period of limitation.

4. Penalty under Section 76 and 78:
The Tribunal set aside the penalties under Section 78, noting that the conditions for invoking the extended period and penalties under Section 78 are identical. Since the extended period could not be invoked, the penalties were also not sustainable. The appeal by the revenue for imposing penalty under Section 76 for the period prior to 09.05.2008 was dismissed as the demand for this period was barred by limitation.

Conclusion:
The appeal by the appellant was partially allowed, and the matter was remanded to the original authority for re-computing the demand for the normal period of limitation. The appeal by the revenue was dismissed. The original authority was directed to finalize the matter within three months of receipt of the order.

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