Introducing Customers to Financial Institutes amount to Business Auxiliary Service: CESTAT [Read Order]

While upholding a service tax demand, the Custom, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi bench has ruled that the activity of introducing customers to the financial institutions for getting loan would amount to Business Auxiliary Service under the Finance Act, 1994.

The appellants acting as a car loan marketing agent for several banks. They used to get commission from financial institutes for introducing customers. The said financial institutes used to pay commission in a fixed percentage on the loan amount disbursed to the end customer. After this commission, the appellant used to pass on substantial portion thereof to end consumer.

The department took a view that the above said activity amount to Business Auxiliary Services for which, the appellants are liable to pay Service Tax.

After hearing the contentions from both the sides, the Tribunal noted that the definition of Business Auxiliary Services as under Section 65 sub-section 19 of Finance Act incorporated vide Notification No. 7/2003 dated 20.05.2003 w.e.f. 01.07.2003 applicable to this case.

While dismissing the appeal, the Tribunal held that “We are of the opinion that the nature of above activity of the appellant is promotion on marketing of the services provided by the client. The same very much falls under sub Clause (ii) of 65(19) of the Act. The appellants actually were sourcing customers for the above mentioned banks. The actual agencies which provide the financial service by giving loans are those banks. They are actually the clients of the appellants. Thus, the services of the appellants were very much that in the nature of Business Auxiliary Services.”