2018 (3) TMI 192 - AT - Service Tax

Liability of service tax - auction of property service - difference between auction and tender - Held that - The auction process will normally get culminated only when there are no more bids made for the goods auctioned. Whereas in respect of tenders there is only one bid that each bidder can make the tendering process will be completed at the end of the appointed time and date and only bids received till that cut off point will be considered for evaluation. However in the traditional method of auctioneering apart from the auction process per se the auctioneer also provides a gamut of other related services like providing a facility advertising or illustrating the goods in auction engage in pre-auction estimates short term storage services etc. - while both sale by tender and sale by auction may have a common intendment of selling the goods the modalities and the processes involved in each are very different. The impugned activities will be leviable to service tax under the scope of Auctioneer Service cannot sustain - appeal allowed - decided in favor of appellant.

Issues Involved:

1. Whether the activities of the appellant fall within the definition of "Auction of Property Service" under Section 65 (7a) of the Finance Act, 1994.
2. Whether the appellants are liable to pay service tax on the service charges collected under the tendering process.
3. Imposition of penalties under various provisions.

Issue-wise Detailed Analysis:

1. Definition of "Auction of Property Service":

The core issue revolves around whether the appellants' tendering process qualifies as "Auction of Property Service" as defined under Section 65 (7a) of the Finance Act, 1994. The appellants argued that their activities do not constitute an auction since the term "auction" is not explicitly defined in the relevant sections. They contended that their process is a tendering process, not an auction, and cited legal precedents to support the distinction between the two.

The tribunal examined the definition of "Auction of Property Service" under Section 65 (7a) and noted that it includes activities like calling the auction, providing a facility, advertising, pre-auction price estimates, and short-term storage services. The tribunal found merit in the appellants' argument that an auction is a live process where all prospective bidders are present and aware of each other's bids, which is not the case in a tendering process. The tribunal concluded that the tendering process does not fall within the ambit of "Auction of Property Service."

2. Service Tax Liability on Tendering Process:

The department argued that the appellants' activities, including the tendering process, should attract service tax under "Auction of Property Service." The tribunal analyzed the differences between an auction and a tender, noting that in an auction, bidders compete in real-time, whereas in a tender, bids are submitted without knowledge of other bids. The tribunal cited several judicial decisions that highlighted the distinction between auction and tender processes.

The tribunal concluded that the appellants' tendering process does not meet the criteria for an auction as defined under the Finance Act. Therefore, the service charges collected by the appellants under the tendering process are not subject to service tax under "Auction of Property Service."

3. Imposition of Penalties:

Given the tribunal's findings that the appellants' activities do not fall within the definition of "Auction of Property Service" and are not liable for service tax, the imposition of penalties under various provisions is also not sustainable. The tribunal set aside the impugned order, which upheld the adjudicating authorities' decisions, and allowed the appeals with consequential benefits to the appellants.

Conclusion:

The tribunal concluded that the appellants' tendering process does not qualify as "Auction of Property Service" under Section 65 (7a) of the Finance Act, 1994. Consequently, the service charges collected by the appellants are not subject to service tax under this category. The impugned order was set aside, and the appeals were allowed with consequential benefits.

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