2010 (1) TMI 372 - AT - Service Tax

Tribunal grants waiver for disputed service tax & penalty in 'Business Auxiliary Services' case

The Tribunal granted the appellant's application for waiver of pre-deposit of disputed service tax amounts, penalty, and interest. It found a prima facie ... Stay-Business Auxiliary Service- the appellant is providing the services of “Business Auxiliary Services”. It is the findings that the appellant being sole selling agent, as per the liquor policy envisaged by the Government of Karnataka, is providing services of “Business Auxiliary Services”. Nature of agreement commercial, providing for payment of advance and adjustment of such advance on sale of liquor. Appellant doing trading activity of liquor in state of Karnataka as per state Government’s policy. Held that- It is also seen from the Balance Sheet that the appellants have been showing the closing stock of the liquor lying with them as at a particular year end. This would indicate that the appellant is doing trading activity of the liquor in the State of Karnataka as per the Karnataka Government’s Liquor Policy. The appellant has made out a prima facie case for the waiver of the pre-deposit of the amounts involved. Thus, application for waiver of pre-deposit of the amounts involved is allowed and recovery thereof stayed, till the disposal of the appeal. Issues:Stay application for waiver of pre-deposit of service tax amounts, penalty, and interest; Determination of whether the appellant provided 'Business Auxiliary Services' and is liable for service tax; Consideration of limitation period for the demand raised by the department.Analysis:The appellant filed a stay application seeking the waiver of pre-deposit of substantial amounts of service tax, penalty, and interest. The Adjudicating Authority had confirmed the amounts based on the appellant's provision of 'Business Auxiliary Services' as a sole selling agent under the liquor policy of the Government of Karnataka. The appellant contended that their activities were in line with the Karnataka Excise Rules, involving the purchase and sale of liquor, and challenged the jurisdiction of the Adjudicating Authority. The appellant argued that the demand was time-barred, citing the Supreme Court's decisions in Nizam Sugar Factory and ECE Industries Ltd. as supporting precedents for the limitation issue.The Revenue, represented by the SDR, argued that the appellant's contractual arrangements with liquor manufacturers indicated a commercial agreement where the appellant received a commission based on sales, with provisions for stock destruction and advance payments. The Revenue contended that the appellant failed to demonstrate a prima facie case or financial hardship, suggesting that conditions should be imposed on the appellant.After considering the submissions and examining the records, the Tribunal analyzed the agreement between the appellant and the liquor manufacturers. The Tribunal observed that the payment clause required the appellant to advance amounts to cover duties, to be adjusted post-sale of liquor. The Tribunal interpreted this clause as indicating the appellant's liability under 'Business Auxiliary Service' for marketing or selling goods on behalf of the client. The Tribunal also noted the appellant's Balance Sheets, showing profits from liquor trading activities and closing stock details, supporting the trading nature of the appellant's operations under the Karnataka Liquor Policy. Consequently, the Tribunal found a prima facie case for waiving the pre-deposit amounts, granting a stay on recovery pending appeal disposal.In conclusion, the Tribunal allowed the appellant's application for waiver of pre-deposit of the disputed amounts, highlighting the trading nature of the appellant's activities and the prima facie case presented. The judgment emphasized the commercial agreements and financial aspects supporting the appellant's involvement in 'Business Auxiliary Services,' ultimately granting relief pending appeal resolution.