By TIOL News Service

BANGALORE, JULY 09, 2014: SERVICE TAX of Rs.1,38,28,232/- has been demanded from the appellants as a service receiver in respect of services received from abroad during the period from May 2006 to March 2010. The counsel on behalf of the appellants submits that the appellants had obtained legal consultancy service for the purpose of obtaining patent rights abroad. This has been categorized under operational or administrative assistance and has been held to be amounting to Business Support Service in the impugned order. He submits that during the relevant period involved in this case, operational and administrative assistance did not form part of the definition of Business Support Service at all and these words were introduced in the definition of ‘Business Support Service' only subsequent to the period covered by the show cause notice in the impugned order. Moreover he also submits that extended period could not have been invoked in this case since the appellant is eligible for CENVAT credit of the entire amount paid and substantial portion of the demand goes beyond the normal period.

After considering the submissions made by both the sides, Tribunal found that as submitted by the counsel, the Commissioner in the impugned order has classified the service under ‘Business Support Service' taking a view that the service received by the appellants is in the nature of operational and administrative assistance. These items were included in the category of Business Support Service only subsequently and during the period involved in this case, the definition did not include operational and administrative assistance.

Moreover on going through the activities undertaken which is basically in the nature of applying for patent and through the relevant documentation work etc. and the details as provided by the Commissioner, Tribunal considered that the activities can be better classified and more specifically covered by Legal Consultancy Service.

However Tribunal also observed that appellant would be entitled to CENVAT credit of the entire tax paid and therefore extended period may not be invokable in this case at all. As regards the amount within the normal period, the situation would be revenue-neutral since the appellant would be entitled to CENVAT credit of the tax paid.

In the result, the appellant has made out a prima facie case for complete waiver of pre deposit and stay against recovery.

Accordingly the requirement of pre deposit is waived and stay against recovery is granted during the pendency of appeal.

(See 2014-TIOL-1230-CESTAT-BANG)