Service tax demand under Business Auxiliary Services fails without specifying relevant Section 65(19) sub-section in notice

CESTAT Kolkata held that service tax demand under Business Auxiliary Services was unsustainable as the Show Cause Notice failed to specify the relevant sub-section of Section 65(19). The tribunal relied on precedent establishing that demands without specifying which of the seven services under Section 65(19) applies cannot be sustained. Regarding Authorized Service Station Service, the tribunal found no service tax payable on reimbursements for after-sale services already included in excise duty assessable value, citing SC precedent. Extended limitation period was rejected as no suppression of facts was established, being standard dealer practice. Appeal allowed, demands set aside.

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Issues Involved:
1. Demand of service tax under 'Business Auxiliary Service' without specifying the sub-section of Section 65(19).
2. Demand of service tax under 'Authorized Service Station Service' on reimbursements for spares and labor costs.
3. Invocation of extended period of limitation for demanding service tax.

Issue-wise Detailed Analysis:

1. Demand of Service Tax under 'Business Auxiliary Service':

The appellant contended that neither the Show Cause Notice nor the Order-in-Original mentioned the specific sub-section of Section 65(19) under which the service tax was demanded. The Tribunal observed that it is a settled position of law that when the Show Cause Notice does not specify the clause under which the activity falls, the demand is not sustainable. This view was supported by several decisions, including Syniverse Mobile Solutions Pvt Ltd vs. Commissioner of Cus, CE & S.T, Hyderabad - IV, where it was held that the Show Cause Notice must clearly indicate the sub-clause under which the service tax is demanded.

The Tribunal concluded that in the absence of a specific sub-section of Section 65(19) of the Finance Act, 1994, the demand of service tax under 'Business Auxiliary Service' is not sustainable and set aside the same.

2. Demand of Service Tax under 'Authorized Service Station Service':

The appellant argued that the reimbursements received from TML for actual spares and labor costs should not be subject to service tax as these are expenses borne by TML and included in the assessable value of their vehicles subject to excise duty. The Tribunal agreed that imposing service tax on these amounts would result in double taxation. It was noted that the reimbursement of labor costs became taxable only from 01.07.2012, and the appellant had discharged the applicable service tax from that date.

The Tribunal further observed that the issue was already settled by the Hon'ble Supreme Court in Union of India v. Intercontinental Consultants & Technocrats Pvt. Ltd., which held that reimbursable expenditure or cost in consideration for services were not included prior to the amendment of Section 67 of the Finance Act, 2015. Consequently, no service tax could be charged on the reimbursements received by the appellant.

Additionally, the Tribunal noted that the Show Cause Notice did not mention any clause or provision for proposing the demand under 'Authorized Service Centre' Services, rendering the demand unsustainable. This view was supported by the decision in NPS Construction v. Commissioner of CGST & Central Excise, Pondicherry.

Based on these observations, the Tribunal set aside the demand under 'Authorized Service Station Service.'

3. Invocation of Extended Period of Limitation:

The appellant contended that the performance of after-sale services by the dealer is a standard industry practice known to the Department. Therefore, the allegation of suppression of facts to invoke the extended period of limitation was unsustainable. The Tribunal agreed, noting that there was no surreptitious mode of operations by the appellant and no suppression of facts with the intention to evade tax was established.

Consequently, the Tribunal held that the extended period of limitation could not be invoked, and no penalty was imposable on the appellant.

Conclusion:

The Tribunal set aside the impugned order and allowed the appeal filed by the appellant, concluding that the demands under both 'Business Auxiliary Service' and 'Authorized Service Station Service' were unsustainable and the invocation of the extended period of limitation was unjustified.

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