By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether services of Direct Sales Associate/Agent of bank is classifiable as “provision of service on behalf of client” or “promotion/marketing of services provided by client”.
Facts:
Appellant challenged service tax under one of the sub-clause of the definition of Business Auxiliary Service (BAS) and applicability of extended period of limitation and levy of penalty.
Appellant was appointed as Direct Sales Associate/ Agent of ICICI and HDFC banks for promoting various products of these banks at relevant times. Appellant obtained service tax registration by disclosing the nature of services rendered by it under BAS category under sub-clause “provision of service on behalf of client” which was made taxable from 10-09-2004 started paying taxRespondent issued demand on the basis that the services provided by Appellant were covered not under the clause of “provision of services on behalf of client” but under sub-clause “promotion/ marketing of services provided by client” which was taxable from 01-07-2003.
Held:
Tribunal after referring the agreement entered between Appellant & Banks held that Appellant by using its expertise, staff, infrastructure was marketing the products of Banks and these were nothing but the services provided by Bank. Hence services of the Appellant were classifiable under sub-clause “Promotion/marketing of services provided by the client” which was taxable w.e.f. 01-07- 2003. Further, non-disclosure of services rendered at the time of obtaining service tax registration in the year 2004 amounted to suppression of material facts for the period prior to year 2004 and hence invocation of extended period was justified. However, since Appellant filed an application under “Extra-ordinary Taxpayer-Friendly Scheme” in the year 2004, the case was considered covered u/s. 80 for setting aside the penalties.
