1. All these three appeals pertain to the same assessee and arise from three orders-in-appeal No. 74/06, 78/2006 and 79/06 dated 24.3.06. The issue being common they are taken up together for disposal as per law.
2. The brief facts for consideration in this case are that the appellants are holders of service tax registration for rendering services under the category "Banking and Other Financial Services".
They were collecting telephone bills from the customers of BSNL. The BSNL has facilitated the customers for depositing the bills in to the account of BSNL with the appellant bank. For the services carried out, they received commission. The department has brought this activity of appellant under the category of 'Business Auxiliary Services" for the various periods in terms of the show cause notice and the impugned order.
3. The finding given by the Commissioner (Appeals) in OIA 74/06 dated 24.3.06 in para 6 is reproduced herein below: I have gone through the records of the case and the submissions made in the grounds of appeal at the time of personal hearing and in the argument note filed. In the instant case the appellant has rendered the service of collection of billed amount of BSNL from the customer of BSNL and received commission for such services. The issue to be decided is whether the aforesaid activities are a 'customer care service' on behalf of the client as defined under Section 65(19)(iii), (vi) and (vii). As per the agreement with the client, M/s BSNL, the appellant were to accept payments of telephone bills in cash/local cheques/Demand Draft. The appellant is to hand over the receipt portion of the telephone bill to the bearer of the telephone bill after distinctly stamping the date of collection, amount received, mode of collection such as cash/cheques/Demand Draft etc. with initials of the collecting official. They should stamp similar details on the counterfoil of the telephone bills retained by them. They should send the returned cheques, if any, to the Accounts Officer (TR) or Accounts Officer authorised to receive all the lists etc. along with a schedule thereof. The appellants contention is that their activity comes under normal banking service provided to the client and they are not providing any service to the customer of the client bit the service is rendered to the clients.
The above contention is untenable as telephone subscribers are customers of BSNL and the appellant is Rendering service these customers by collecting the bills. That service is on behalf of BSNL and it relates to customer care. Thus all the conditions for invoking the provisions of Clause (iii), (vi) and (vii) of Clause 19 of Section 65 of Finance Act 1994 have been satisfied. The appellants contend that the Sub-clauses (i) and (ii) of Section 65(19) would give an insight into the scope of the expression 'customer care service' and the same should relate to an activity of promotion or marketing or sale of goods on promotion or marketing of service and subsequent transactions like after sale service of after sale activities which are necessarily intended by way of 'Customer care'. This is not correct since the activities under Sub-clause (i) to (vi) are independent and not related. The service performed by the appellant is incidental or related to activity provided in Sub-clause (iii), and (vi) of Section 65(19) as the collection of bills is customer care service rendered on behalf of the client and appellant's argument that their activity is not connected to the service specified under Sub-clause (i) to (vi) is not acceptable and is against facts in the circumstances, I agree with the findings of the lower authority that the collection of bill amount from the telephone subscribers, on behalf of BSNL on commission would fall under the provisions of Section 65(19). Hence the demand for service tax is in order. Since the appellant failed to pay the service tax in time and did not get the services endorsed in their Registration Certificate the imposition of penalties under Section 76 and 77 are justified.
In view of the above I confirm the impugned order passed by the lower authority.
The Orders in other two appeals are identical. The appellants contend that the definition of "business auxiliary service" refers to promotion or marketing or sale of goods produced or provided by or belonging to the client or any service incidental or ancillary to any activity specified in this regard in terms of billing issue or collection or recovery of cheques, payments, maintenance of accounts and remittances, inventory management evaluation or development of prospective customer or vendor, publication, public relation services, management or supervision would be included into this category. They contend that italic (iii) of the definition of 'business auxiliary service' refers to any customer care. It is their contention that they do not satisfy the category of promotion or marketing etc., as in italic (i) or italic (iii) pertaining to customer care service for the simple reason that they are not promoting or marketing or selling the goods produced by the BSNL and in this regard any activity incidental to the italic (i) with regard to billing or issue or collection of cheques are not being done. The customers of BSNL are merely depositing the amount due to the BSNL in to the BSNL account i.e. the appellant being a banking industry are giving the facility to the customer who is having their account to enable their customers to deposit the amounts due to them. It does not come under the 'business auxiliary services.' The category 'business auxiliary services' excludes cash management. They submit that the activity is in the nature of cash management. It is excluded under 'banking and other financial services'. Therefore their contention is that their activity of giving facility to their client to allow the operation of the account, in as much as their client is only permitted to allow their customers to deposit the amounts in to their accounts is within the banking activity. Such activity is not covered under the category of 'customer care service' within the category of 'business auxiliary service'.
4. I have heard both sides in the matter. Learned Cost Accountant appearing for the appellants took me through the records and the definition of 'business auxiliary services' and that of 'banking and financial services'. He submits that the operation of account of any of their client cannot be considered as coming within the category, of 'customer care services'. They are not providing any service to the customers of their clients. It cannot be said to be activity connected with 'customer care service'. He points out that the definition of 'customer care service' has to be read along with the 'business auxiliary services' which term is explained in Section 65(19).
Predominantly it refers to promotion, marketing and sale of the product which they are not doing and if any agent collects cheques on their behalf, then it is considered as incidental to the promotion or marketing or sale of goods which has not been done. Therefore the category 'business auxiliary service' is not appropriate and not covered in their activity. The activity which they are carrying on is that of 'banking and other financial services' and in that category, the activity of cash management is excluded in category italic (v) of the said definition.
5. Learned DR defended the order and pointed out to the following judgments.Corporate Debt Management Services v. CCE & ST Coimbatore 2007 (8) STR 252 (Tri-Che)Focussed Corporate Services (I) P Ltd., v. CCE (ST) 2007 (8) STR 261(Tri-Che) 4) Bridegestone financial Services v. CST Bangalore 2007 (8) STR 505 (Tri-Bang) It is his submission that the relationship between the appellant bank and that of their client BSNL is that of customer care service provided on behalf of the client. They have received the commission from BSNL for this activity. Therefore for having provided the services on behalf of their client and receiving commission, they appropriately come within the category of 'customer care service'. He submits that the category under italic (iii) in 'customer care service' provided on behalf of the client should not be read independent of italic (i) but to be read along with italic (vii). It refers to services incidental or ancillary to any activity specified from italic (i) to italic (vii).
6. I have carefully considered the submissions. I notice that the judgments referred to by learned SDR are not akin to the facts of the case. In case of Bellary Computers (supra), the appellant was providing software and hardware for revenue management system for electricity supply concern. The matter was examined and held that billing or other activities relating to information technology service was excluded from business auxiliary service. The matter was remanded for recomputation of service tax liability by excluding the amounts charged for hardware and information technology service. The facts are distinguishable and not applicable to the present case. In the case of Corporate debt management services (supra), the appellants were recovery agents and were collecting and recovering cheques and that was held to be coming within the category of 'any incidental or auxiliary support service' under 'business auxiliary service'. The activity carried out by the appellants was that of business auxiliary service and therefore it was rightly covered. The facts are distinguishable with the present case.
In the case of Focussed Corporate Services (I) P Ltd., (Supra) the appellants were carrying on the activity of marketing of loans and credit cards which was a business auxiliary activity as marketing and sales was being done and hence this activity is distinguishable. In the case of Bridgestone Financial Services, the appellants were carrying on the activity of promotion of services rendered by clients and it was a business auxiliary service. This is also distinguishable.
The definition of business auxiliary services given in Section 65(19) is as follows: (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (iv) procurement of goods or service, which are inputs for the client; or (vii) a service incidental or auxiliary to any activity specified in Sub-clause (i) to (vi), such as billing, issue of collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision and includes services as a commission agent, but does not include any information technology services and any activity that amounts to "manufacture: within the meaning of Clause (f) of Section 2 of the Central Excise Act, 1944 While the definition of banking and other financial services under Section 65(12) is as follows: (a) the following services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate, namely: (i) Financial leasing services including equipment leasing and hire-purchase by a body corporate; (v) Asset management including portfolio management, all forms of fund management, pension fund management, custodial, depository and trust services, but does not include cash management; (vi) Advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restructuring and strategy; (viii) Provision and transfer of information and date processing; and (b) Foreign exchange broking provided by a foreign exchange broker other than those covered under Sub-clause (a); As can be seen from the definition of 'business auxiliary service', as extracted above, the activity has to be that of promotion or marketing or sales of goods produced or provided by or belonging to the client.
The other categories, akin to the same activity is defined under italic (i) to Italic (vi). Reference to services incidental or auxiliary to any of the activities specified in italic (vii). Basic activity should be that of promoting or marketing of sale of goods produced and in that connection if the activity of billing, issue of collection or recovery of cheques, payments, maintenance of accounts and remittances etc., are done then they came within the main category of business auxiliary services. I am required to see as to whether the appellants at all are carrying on the activity of promotion, marketing or is ale of goods produced and any activity incidental or auxiliary to the activities mentioned under 'business auxiliary service'.
7. On a careful consideration I find that appellants have permitted their client BSNL to allow their customers to deposit the bill amounts.
This activity is a simple operation of account done by the customers of their client which does not have any connection with any of the activities defined under business auxiliary service or promoting or marketing of sale of goods produced or provided by or belonging to the client and any activity incidental to that. The basic activity of promoting or carrying on of sale of goods should be there and the collection of cheques should be in connection with this activity. In this case, the collection of cheques is not in connection with promotion or marketing of sale of goods. Therefore merely because the customers of the client are depositing the cheques into the clients account, it cannot be said to be coming within the category of business auxiliary service, more particularly under italic (iii). It cannot be independent of that category. Such an activity is not found in the present case. The definition of 'banking and other financial service' clearly indicate with regard to the asset management and also refers to the asset management in the category of italice (v) of the definition.
It also refers to depository and trust services but does not include cash management. The appellants activity is in the category of cash management in as much as the clients are operating their accounts and cash flow of the client is coming to the clients account. Therefore, the activity is that of cash management which is excluded from 'banking and other financial services'. The appellants have made out a case that there are not covered under the category of 'customer case service' in the main category of 'business auxiliary service' and hence their contention is required to be accepted. Learned representative for the appellants referred to the judgment in the case of Dr Lalpath Lab Pvt.
Ltd., v. CCE Ludiana 2006 4 STR 527(Tri-Del) paras 1 to para 12 are reproduced herein below.
The appellant, herein run "Sample Collection Centres" for specialised laboratories like Dr. Lal Path Labs Pvt. Ltd., New Delhi, M/s Speciality Ranbaxy Ltd. They maintain the collection centre, draw/collect samples, process the samples to the extent required and forward (through courier service etc.) the samples to the test laboratories. The relationship with the principal is covered by Agreement. The basic terms are that the collection centres would, have facilities and trained employees for drawal of blood samples, will carry out the essential processing (serum separation) of blood and forward the samples to the principals through curriers. The collection centres are also responsible for the disposal of waste arising in the process. The test charges are collected by these Centres at the rates stipulated by the test laboratories. The collection centres are paid a percentage (25% etc.) for the service rendered by them.
2. Under the impugned orders, it has been found that the services rendered by these collection centres are "Business Auxiliary Services" which attract service tax. Tax demands remain confirmed on that basis. The orders rejected the contention of the appellants that their services were actually "Technical Testing and Analysis Service" or part of those services and remain excluded from the Levy under the relevant heading.
3. We have heard the learned Counsel for the appellants and learned SDR and have perused records.
4. As already noted, the dispute is whether the service rendered by the collection centres is Business Auxiliary Service or Technical Test and Analysis services. We may reproduce the relevant taxing provisions before taking up the issue for discussion: (106) "Technical testing and analysis" means any service in relation to physical, chemical, biological or any other scientific testing or analysis of goods or material or any immovable property but does not include testing or analysis in relation to human beings or animal, (19) "business auxiliary service" means any service in relation to, - (i) Promotion or marketing or sale of goods produced or provided by or belonging to the client; or (iv) Any incidental or auxiliary support service such as billing, collection or recovery of cheques, accounts and remittance, evaluation of prospective customer and public relation services, and includes services as a commission agent, but does not include any information technology service, 5. The contention, of the learned Counsel is that testing starts with drawal of sample and thus, forms an essential and integral part of testing. It is being submitted that since definition of "technical testing and analysis" under Clause (106) "does not include testing or analysis in relation to human beings or animal", the testing service rendered by the appellant is excluded from service tax. Learned Counsel for Ludhiana Collection Centre for Dr.
Lal Path Labs Pvt. Ltd. has pointed out that the Commissioner has noted in the impugned order that what the appellant does "may also be essential part of testing and analysis procedure carried out at parent company's lab.," but has incorrectly held that the activity carried out by the appellant amounts to promotion or marketing of service provided by the client M/s Dr. Lal Path Labs, New Delhi and is covered under Section 65(19)(ii) of the Act as defined therein during the relevant period". The point made is that the finding is contrary to the factual position noted. The contention is that a service cannot simultaneously he part of testing and analysis, and "promotion or marketing of service 6. Learned Counsel would also submit that a service that has been specifically listed (technical testing and analysis) under one heading, cannot be subjected to tax under another heading (Business Auxiliary Service) simply because that service remains excluded from, levy under the relevant heading. It is being pointed out that such an approach world be contrary to the legislative scheme.
7. Supplementing the legal position canvassed on behalf of the collection centre for Dr. Lal Path Labs. Pvt. Ltd., the learned Counsel for the collection centre of Speciallity Ranbaxy Ltd. would contend that even if drawal of blood sample did not form part of "technical testing and analysis service", no levy would be attracted in view of the expanded scope conferred on that service through its definition under the statute. His emphasis is that "technical testing and analysis service" would cover not only the services strictly and narrowly falling within the ambit of these services; but also "any service in relation to" those services in view of the definition. It is being contended that services that are ancillary or auxiliary or connected to the specified services (technical testing and analysis) would also fall within the scope of the specified services in view of the broad sweep of the language used in the definition. The submission of the learned Counsel is that as there could be no dispute that drawing of blood sample is an essential step for testing the sample, it has to be treated as, auxiliary and integrally connected to testing and analysis service, (even if not treated as forming part) and thus, a service "in relation of testing". The contention is that since the definition covers "any service in relation to testing" and the levy "does not include testing or analysis in relation to human beings or animals", the drawing of sample should also be treated as not included in the levy under technical testing and analysis service.
8. Learned SDR would contend that testing of sample is an entirely separate activity from drawing of samples of materials to be tested.
According to him, test samples can be drawn by any competent person and sent to the testing laboratory but the process related to testing starts only after the sample is received in the test and analysis laboratory. To this, the appellants' reply is that, if not the rest, the serum separation carried out by them, would form part of testing and analysis.
9. With regard to the scope of the levy on testing and analysis service, the contention of the learned SDR is that since "testing or analysis" in relation to human beings or animal is excluded from the scope of the levy through statutory definition, any testing or analysis in relation to human beings or animal should be treated as outside the purview of levy under that heading and would attract service tax, if that activity fell under any other taxable service under the statute. It is the contention of the learned SDR that since the present appellants carry out advertisements for their clients by keeping their board etc. and sell the services by raising bills, it is clearly a promotion or marketing service and would attract levy accordingly. He would also submit that Sub-clause (iv) in the definition of 'business auxiliary service' specifically includes 'any incidental or auxiliary support service'. The point emphaised is that since the appellants perform many services incidental to the testing and analysis service such as collecting samples, billing, supplying test reports, they clearly come within the scope of levy as "any incidental or ancillary support service".
10. With regard to the contention of the appellant that all services 'in relation to' technical testing and analysis service are also excluded from the service tax, the contention of the learned SDR is that the service should form part of technical testing and service to be in relation to that service. It is his contention that since drawing of sample has no connection with test per se, it cannot be treated as "in connection with" the test.
11. There is no dispute that testing and analysis carried out in the specialised laboratories constitute "technical testing and. analysis service" contemplated under the law. Those laboratories are also not subjected to, including in relation to the drawing of blood samples, service tax, treating those tests and analysis as relating to human beings. The services rendered by the appellants - drawing, processing and forwarding of samples - is integral to the testing of those samples. As already noted, one of the impugned orders has also noted that the drawing of test samples may form part of test and analysis. All the same, they are being subjected to tax on the plea that those services are separate from the scope of testing and analysis service and are taxable as business auxiliary service. This approach is hard to understand. There could be no denying that in the absence of drawing of blood samples, there can be no testing.
Further, even if the two services are seen as entirely separate and different services, drawing of sample and initial processing of the same are, clearly, connected or incidental or ancillary to testing and analysis. We have already reproduced the definition of technical testing and analysis service in para 4 of this order. That definition is very broad in its scope. It covers "any service in relation to testing and analysis service". Thus, drawing of samples will come within the scope of the definition. The dispute as to whether drawing of sample forms part of testing and analysis service is not relevant in view of the sweeping nature of the definition. If the service is 'in relation to' testing, the service will get classified under technical testing and analysis. It is inconceivable that 'relationship' of sample drawing and initial processing to testing can be denied. The relationship may be incidental or auxiliary. Whichever way it is, its connection to testing and analysis service is clear, integral and undeniable. Thus, in the factual situation of the case, and the broad scope of the definition, definitely bring the services renders by the collection centres within the scope of technical testing and analysis service.
12. It is well settled that once there is a specific entry for an item in the tax code, the same cannot be taken out of that specific entry and taxed under any other entry. In the present case, revenue is seeking to discard the specific entry and to bring the appellants' services under a very general entry, only because under the specific entry no tax is payable. This approach is contrary to the scheme of the legislation. What is specifically kept out of a levy by the legislature cannot be subjected to tax by the revenue administration under another entry.
In terms of the above paras it is clear that cash management service has been netted out from specific category. Therefore, the revenue cannot bring that activity under any other category of customer care services. Likewise this judgments of Dr Lalpath Lab Pvt Ltd., has been confirmed by Apex court as reported in 2007 (8)1 STR 333 (P&H). In the light of the above observation. I find that the impugned orders are not legal and proper, hence they are set aside by allowing the appeals.