2021 (1) TMI 1172 - AT - Service Tax

Business Auxiliary Service - transportation facilities to the employees of companies like M/s. Ford India Ltd. M/s. Satyam Infotech Ltd. - period from 1-10-2005 to June 2006 - Time Limitation - HELD THAT - The department does not dispute the payment of service tax on the very same activity after introduction of BSS. As rightly pointed out by the Ld. Counsel for the appellant BSS is not a category carved out of BAS. It is an introduction of a new entry. Thus when the appellant has been discharging their service tax liability under BSS after its introduction the very same activity cannot be classified under BAS for the period prior to 1-5-2006. The view taken by the department that introduction of a specific entry is not absolving the appellant from the liability for the past period is not tenable since BSS is a new entry which was introduced w.e.f. 1-5-2006 only. In the case of SANA ENGINEERING COMPANY VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX COIMBATORE 2018 (9) TMI 1723 - CESTAT CHENNAI it was held by the Tribunal that when a new category of activity is brought out under the service tax the same can be taxed only with effect from the date on which the new service is brought under service tax net. Department cannot claim that the very same activity was taxable under an existing category. Time limitation - HELD THAT - The demand cannot sustain on the ground of limitation also. The issue is purely interpretational in nature. Appellants have been paying service tax under BSS after its introduction in the Finance Act 1994. This is accepted and admitted. There is no evidence to prove that appellants wilfully suppressed facts with intention to evade payment of service tax. The appellant succeeds on limitation also. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Demand of service tax under Business Auxiliary Service (BAS) for the period prior to the introduction of Business Support Service (BSS), Interpretation of classification of services, Applicability of limitation period.

Analysis:

Issue 1: Demand of service tax under BAS for the period prior to the introduction of BSS
The case involved a dispute regarding the classification of services provided by the appellant for the period from October 2005 to June 2006. The department contended that the appellant should pay service tax under BAS for providing transportation services to employees before the introduction of BSS. However, the appellant argued that since they started paying service tax under BSS after its introduction, the same activity cannot be retrospectively classified under BAS. The Tribunal agreed with the appellant, emphasizing that BSS is a new entry introduced from May 1, 2006, distinct from BAS. Citing precedents, the Tribunal held that a new category of activity can only be taxed from the date it is brought under the service tax net, rejecting the department's claim that the activity was taxable under an existing category.

Issue 2: Interpretation of classification of services
The appellant's counsel highlighted the definitions of Business Auxiliary Service and Business Support Service, arguing that the activity in question falls under BSS based on the amended definition covering operational or administrative assistance. The counsel contended that the department's attempt to reclassify the activity under BAS was unfounded, especially considering the specific entry for BSS introduced after May 1, 2006. The Tribunal found merit in the appellant's argument, emphasizing that the introduction of a specific entry absolves the appellant from liability under BAS for the period in question.

Issue 3: Applicability of limitation period
The appellant also raised the issue of limitation, asserting that the demand could not sustain due to the interpretational nature of the dispute. The Tribunal concurred, noting that the appellant had been compliant in paying service tax under BSS post its introduction, without evidence of willful suppression or intent to evade payment. Consequently, the Tribunal ruled in favor of the appellant on the grounds of limitation as well, setting aside the demand for service tax and allowing the appeal with consequential relief as per law.

In conclusion, the Tribunal held that the demand for service tax under BAS for the period preceding the introduction of BSS was not sustainable, emphasizing the distinct nature of the two categories and the absence of evidence supporting the department's claims. The decision also highlighted the importance of interpreting tax liabilities in line with the specific entries and timelines outlined in the relevant legislation.