By TIOL News Service

MUMBAI, OCT 12, 2014: THE appellants are providing servicesof verification of information given by the customers applying for the Credit Cards, Home Loans or Auto Loans etc. The said activities have been outsourced to them by various banks. The appellants are registered under the category of "Business Auxiliary Service" and paying service tax on the said activities except for the services provided to ICICI Bank and IDBI Bank.

Revenue wanted the appellant to also pay ST on the services provided during the period July 2002 to March 2006 to these Banks and, therefore, issued SCNs and which were confirmed by the CCE, Pune-III .

Before the CESTAT, the appellant submitted that the activity undertaken by the appellants falls under the category of "Business Support Service" which came into effect on 01.05.2006 and, therefore, they are not required to pay service tax under the category of "Business Auxiliary Service"prior to May 2006.

The AR submitted that from 01.07.2003 the activity of "Business Auxiliary Service" came into Service Tax net and as per clause (iv) of Section 65 (19) of the Finance Act, 1994, the activities and services of the appellants are coming within the ambit of the service tax category of "Business Auxiliary Service”. It is further submitted that intention to evade payment is very much clear from the dealing of the appellants as they are paying service tax on the same services provided to other Banks except ICICI and IDBI . Therefore, extended period of limitation is also invokable in the facts of this case.

The Bench adverted to the definition of "BAS"prevailing during the period prior to 10.09.2004 which reads -

(iv) any incidental or auxiliary support service such as billing, collection or recovery of cheques, account and remittance, evaluation of prospective customer and public relation services

And observed -

"Prior to 10.09.2004, the activity undertaken by the appellant clearly falls under Clause (iv) of Section 65(19) of the Finance Act, 1994. Therefore, prior to 10.09.2004, we hold that the appellant is required to pay service tax and the demand for service tax for that period is confirmed."

Referring to the definition of "Business Auxiliary Service"as substituted w.e.f 10.09.2004, the Bench noted -

"…As in this case, the appellants'activities does not get covered under clause (i) to (vi) of Section 65 (19). Therefore, we hold that with effect from 10.09.2004 onwards the appellants are not required to pay service tax. We find support to the case from the decision of this Tribunal in the case of S.R. Kalyanakrishnan v. CCE -…wherein this Tribunal has observed that verification of information furnished by loan seekers cannot be treated as promotion their business. Therefore, such activity does not fall under "Business Auxiliary Service"but with effect from 01.05.2006, it falls under the category of "Business Support Service”. Following the precedent decision in the case of S.R. Kalyanakrishnan, we hold that for the period 10.9.2004 onwards the appellants are not liable for service tax under the category of "Business Auxiliary Service"on their activities."

The CESTAT concluded -

"…the appellants are liable to pay service tax for the period 01.07.2003 to 09.09.2004 on the services provided to ICICI and IDBI Banks under the category of "BAS”. With these terms the appellants are directed to pay service tax for the said period along with interest."

On penalty and valuation, the Bench held -

"We further find that as the appellants are paying service tax on the same activities provided to other banks therefore, we impose penalties equivalent to their service tax liabilities on the appellants under Section 78 of the Finance Act, 1994. We further find that as the appellants have not charged service tax separately from ICICI and IDBI Banks therefore, the remunerations received towards providing service, service tax shall be treated as cum-service charges."

The appeals were disposed of in above terms.

(See 2014-TIOL-1974-CESTAT-MUM)