CESTAT, BANGALORE BENCH

S.R. Kalyanakrishnan

v.

Commissioner of Central Excise, Cochin

Dr. S.L. Peeran, Judicial Member

and T.K. Jayaraman, Technical Member

Final Order No. 875 of 2007

Appeal No. ST/125 of 2006

August 3, 2007

Business support services

Section 65 of the Finance Act, 1994 - Business support services - Period prior to 1-5-2006 - Assessee was appointed by bank to verify correctness, fairness and authenticity of informations furnished by those seeking bank loans - Whether verification of details given by loan seekers could not be treated as promoting bank’s business and, hence, could not be treated as ‘Business auxiliary service’ - Held, yes - Whether, services rendered by assessee would be covered under category of ‘Business support service’ which was taxable with effect from 1-5-2006 - Held, yes - Whether, however, since service was rendered prior to 1-5-2006, assessee was not liable to pay service tax - Held, yes [Para 6]

>> FACTS

The assessee was appointed by bank to verify the correctness, fairness and authenticity of information furnished by those seeking loan from bank. The revenue demanded service tax from the assessee for the period prior to 1-5-2006 on the ground that he had been carrying out the services of ‘Business auxiliary service’ since the service was provided in relation to promotion of service provided by the client. The assessee contended that since there was no element of promotion of loan by him and moreover, job undertaken by him was evaluation of prospective customers to bank, such service was covered under category of ‘Business support service’, which was taxable with effect from 1-5-2006 only. The assessee further contended that since the service in the instant case was rendered prior to 1-5-2006, there was no liability on its part. The Assistant Commissioner, however confirmed the demand along with interest under section 75 and imposed penalty under sections 75A and 78. On appeal, the Commissioner (Appeals) confirmed the order of the Assistant Commissioner.

On appeal:

>> HELD

Verification of details given by loan seekers to bank could not be treated as promoting its business. The services rendered by the assessee would be rightly classifiable as ‘Business support service’ which came into taxable net only with effect from 1-5-2006. In these circumstances, the demand of service tax, interest and imposition of penalty made in the impugned order had no merit. Hence, the order-in-appeal was to be set aside. [Para 6]

M. Balagopal for the Appellant. Smt. Sudha Koka for the Respondent.

nn