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2016 (2) TMI 806 - CESTAT MUMBAI

2016 (2) TMI 806 - CESTAT MUMBAI - 2016 (43) S.T.R. 235 (Tri. - Mumbai) - Demand of service tax - valuation - reduction of reimbursement of expenses - seeking benefit of 'cum-tax' valuation and dropping of penalty under section 76 of Finance Act, 1994 - business auxiliary service being provided by the Bank - wrongful classification of service - Held that:- An existing service provider may, additionally, be required to operate a 'front office' of the client to reinforce the credibility of the fin .....

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mits envisaged by the legislature. - We notice that the bulk of the expenses have been incurred on salaries, telephones, office space and advertisements, all of which may be considered to be essential to bringing the banking institution to the doorstep of the customer and is, thereby, inextricably enmeshed with the financial product offered by the bank. The costs claimed to be reimbursibles are, therefore, not attributable to the 'business auxiliary service' rendered by the assessee but to .....

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fails to survive. It would appear that the adjudicating authority was itself not unambiguously certain about the taxability and its scope; the assessee cannot be placed on a higher pedestal of more exacting standards of comprehension and compliance. Invoking of section 73(4) of Finance Act, 1994 is, therefore, not warranted. The first appellate authority has dropped the penalty under section 76 of Finance Act, 1994.There is no justification for having continued with, the adjudication after the t .....

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pril 2011 of Commissioner of Central Excise (Appeals-IV), Mumbai Zone-I which, though extending the benefit of 'cum-tax' valuation and dropping of penalty under section 76 of Finance Act, 1994, held them liable to service tax of ₹ 18,20,271/- as provider of 'business auxiliary service' for the period between April 2004 and October 2004 and interest thereon besides upholding penalty under section 78 of Finance Act, 1994. The original authority, Additional Commissioner of Ser .....

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bank operating in many cities, they were entrusted with the task of tele-calling, identifying of potential customers, sourcing applications and forwarding the same to the bank for which it is claimed that ₹ 40,000/- per month was paid as remuneration besides being reimbursed for certain expenses incurred by them. According to Revenue, M/s Baven Desai renders 'business auxiliary service' to M/s ABN Amro Bank and the 'reimbursable expenses' cannot be excluded from computation .....

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rged service tax on the fixed monthly remuneration which, according to them, is the consideration for service rendered. 3. The first appellate authority concluded that the activities of M/s Baven Desai are covered by section 65(19)(ii) of Finance Act, 1994 and that 'gross amount charged' in section 67 of Finance Act, 1994 precluded acceptance of claim for abatement of reimbursements in computation of the total costs involved in providing the taxable service. The plea for non-inclusion of .....

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for extension of benefit of exemption notification no. 13/2003-ST dated 20th June 2003 and notification no. 14/2004-ST dated 10th September 2004 were not accepted in the impugned order. 4. On being informed that Revenue, too, is in appeal against the impugned order, records pertaining to appeal no. ST/483/2011 were called for to enable disposal of both in the same proceedings. 5. M/s Baven Desai claims, as was done before the first appellate authority, that the adjudication proceeding was vitia .....

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Desai places reliance on the decisions of this Tribunal in Wings Group of Companies v Commissioner of Service Tax [2008 (12) STR 287 (T-Bang)] and SR Kalyanakrishnan v Commissioner of Central Excise [2008 (9) STR 255 (T-Bang)] to contend that the activities contracted are taxable under section 65(105)(zzzq). Learned Authorized Representative drew attention to the agreement of the assessee with the bank as falling squarely within the definition in section 65(19)(ii) as held in the impugned order .....

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ll as grounds thereof, were made before the first appellate authority; no fresh material has been furnished before us and we find ourselves to be in concurrence with the evaluation by, and conclusion of, the first appellate authority that there is no lapse of jurisdiction or lapse of authority in the rendering of adjudication by Additional Commissioner of Service Tax, Mumbai. 8. Turning to the issue of wrongful classification of service, we observe that this has not been considered by the lower .....

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flicting claims, attached, as they are, to alternatives of a rate or zero at the relevant point in time, liable to determination for according constitutional approval to the tax collected. The two rival entries are complex in description and multifarious in composition. Both relate to activities that are relevant only in a business context, i.e. the recipient of service has to be a business entity. Both are subject to tax, albeit not in chronological proximity, because these are activities that .....

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tsourcing by business entities. From the viewpoint of the recipient, 'business auxiliary service' is the outsourcing in relation to externality of the business entity while 'support services of business or commerce' is the outsourcing of the internal activities of the business entity. We do not need to concern ourselves with 'support services of business or commerce' as that was rendered taxable only from 1st May 2006 long after the period in dispute in the present appeal .....

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liary support service such as billing, collection or recovery of cheques, accounts and remittance, evaluation of prospective customer and public relation services, and includes services as a commission agent…..' With effect from 10th September 2004, the following were also incorporated in that definition (iv) procurement of goods or services, which are inputs for the client; or (v) production on behalf of, the client; (vi) provision of service on behalf of the client; and the existing .....

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in re SR Kalyanakrishnan referred supra was in the context of a specific set of activities relating to applications for loan and was followed in re wings Group of Companies owing, presumably, to identical transactions by that service provider. We notice that the assessee in this appeal was in the business of making potential customers of M/s ABN Amro aware of the various financial products offered by the bank. This included calling up individuals, obtaining application forms and furnishing them .....

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amount of ₹ 40,000 and that tax has been discharged on this amount. It is also noticed that the other inflows into the designated bank account maintained with the client has been claimed to be reimbursement of expenses incurred by M/s Baven Desai on behalf of the client. Revenue went to the extent of calling for vouchers to examine this claim but, having gone through this process, as admitted in the show cause notice, chose to ignore this claim while confirming demand of tax on the entire .....

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he entire payment received from a recipient of service is not envisaged or authorized by law. Tax collection is sanctified only to the extent of identifying the value of the service rendered. The claim of an assessee that a specific amount is the value of the service rendered is questionable only when Revenue can establish that there are elements in the receipts which require inclusion in the charge for the service rendered. Such an exercise is not perceptible in the proceedings before the lower .....

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for services unknown. That would not be a tax on services but a tax on receipts which is not the legislative intent or objective of taxing services. 14. To ascertain the quid pro quo for the consideration, facts and circumstances of the transaction must be comprehended. The client M/s ABN Amro Bank, offers financial products for a customer base spread across the country. The provenance of such products should visibly be linked to the financial institution; that is, and has been, the peculiarity .....

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Bank, operates is subject to rigorous regulation in the number of branches that it can operate. An existing service provider may, additionally, be required to operate a 'front office' of the client to reinforce the credibility of the financial products. These may be mandates of the client for which the client may have to make a separate payment - whether these are for actual or on lumpsum is a matter of commercial agreement. To the extent that compliance with these mandates are liable to .....

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