Classification of Service on Basis of Non-Existing Provision is Bad in Law: CESTAT quashes Service Tax Demand
CESTAT quashed service tax demand as held that the classification of service on basis of non-existing provision is bad in law
The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Allahabad Bench quashed service tax demand as held that the classification of service on basis of non-existing provision is bad in law. The Appellant entered into Agreements with IVP-US and BACS for above said services. From the Agreement dated 21.03.2016 with IVP-US which was the same for earlier period also, it was...
The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), Allahabad Bench quashed service tax demand as held that the classification of service on basis of non-existing provision is bad in law.
The Appellant entered into Agreements with IVP-US and BACS for above said services. From the Agreement dated 21.03.2016 with IVP-US which was the same for earlier period also, it was found that IVP-US had provided services for identification and prediction of market trends in US, analysis of customer needs on regular basis etc against payment equal to IVP-US‟s cost plus appropriate margin as per global transfer pricing.
On the issue of non-inclusion of services like identification and prediction of market trends in US, to analyse customer needs on regular basis, full time marketing services provided by IVP globally, generate leads for potential sales and help in closing and executing projects for IVP etc, he contended that the Appellant was granted permission by SEZ for carrying out software development services and the said activities include above operations also.
A Two-Member Bench comprising PK Choudhary, Judicial Member and Sanjiv Srivastava, Technical Member observed that “It is noticed that for classification of impugned services definition of Business Auxiliary Service given in section 65 of the Finance Act, 1994 was taken into consideration. Section 65 of the Finance Act, 1994 was omitted with effect from 01.07.2012. It shows that the definition was not in existence with effect from 01.07.12.”
“The demand in the instant case pertains to April,13 to June,17 when the definition provided under section 65 was not in existence. The classification of service on the basis of a non-existing provision is bad in law. With effect from 01.07.12, all services except services mentioned in negative list were made taxable. Contrary to that, definition of „intermediary‟ was available even after 01.07.12 and nature of impugned services were within four corners of intermediary services. We therefore find that observation of the Pr. Commissioner is not sustainable and liable to be set aside” the Tribunal held.
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