2025-VIL-180-CESTAT-MUM-ST
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SERVICE TAX CESTAT Cases

Service Tax - Business Auxiliary Service, Business Support Service, Rendering of E-Governance Services - Demand of service tax on Bill Printing and Dispatch, Card Personalization and E-Governance Services provided by the appellant - Whether the Bill Printing and Dispatch service provided by the appellant falls under the category of 'Business Auxiliary Service' - HELD - The Bill Printing and Dispatch service provided by the appellant does not fall under the category of 'Business Auxiliary Service' as the appellant was only engaged for the purpose of printing and stuffing bills in envelopes, and was not involved in any billing or accounting activities for its clients - the appellant was only engaged for the purpose of printing and stuffing bills in envelopes, as was also reflected in the scope of work under various agreement entered into by the appellant in this regard. Therefore, the said activity of the appellant cannot be equated with “billing” and, thus, would not fall as Business Auxiliary Service under any clause of Section 65(105)(zzb) including clause (vii) - the appellant is nowhere connected with the provision of service on behalf of its clients as it did not have any contact with the customers of the clients and, thus, did not provide any service “on behalf of client” and, in case of any discrepancy in the bill the end customers of the clients would not contact the appellant but to their service provider – The demand of service tax raised for Bill generation/printing and dispatch service under BAS is set aside - the demands in the show cause notice for Bill Printing and Dispatch service, Card Personalization service and E-Governance Services are set aside – the appeal is allowed - Whether the Card Personalization service provided by the appellant amounts to 'manufacture' and is thus outside the purview of service tax - HELD - the Card Personalization service provided by the appellant amounts to 'manufacture' as the processes undertaken by the appellant to convert simple plastic cards into credit/debit cards would squarely fall within the meaning of 'manufacture' under the Central Excise Act, 1944 - Adjudicating Authority is not justified in picking the words as per his convenience for quoting incomplete entry 8523 as “smart cards and other media for the recording of the sound or other phenomena” and skipping “whether or not recorded…” and then coming to the conclusion that smart cards before recoding of any phenomena will only qualify under CETH 8523. This finding is erroneous as all smart cards and other media for the recording of the sound or other phenomena, whether recorded or not will fall under the said CETH 8523. Further, the conclusion arrived at by the adjudicating authority that the digital code recorded on the magnetic strips of the smart cards does not qualify as a phenomena because it is not perceptible to human senses is totally erroneous and without any basis. If the reasoning of the adjudicating authority is accepted, it would mean that even the SIM cards or for that matter Proximity cards would go out of CETH 8523 even though they are specific entries in the Tariff - the Adjudicating Authority erred in confirming service tax demand on the said activity under section 65(19)(v), (vi) and (vii) as the same is not service but involves process of manufacture of excisable goods. Accordingly the demand of Service Tax under ‘Card Personalisation service’ is set aside - Whether the E-Governance Services provided by the appellant are taxable under 'Business Support Service' - HELD - though the charge in the Show Cause Notice is to demand service tax on the eSeva service under Section 65(19) as Business Auxiliary Service, however, the adjudicating authority has confirmed the demand of service tax by classifying the eSeva activities under “Business Support Service” under Section 65(104c) by rendering a finding that the E-seva services are not covered under Business Auxiliary Service which is completely beyond the scope of show cause notice and liable to be set aside – Further, the E-Governance Services provided by the appellant are not taxable under 'Business Support Service' as the services were provided to various government bodies and societies in relation to their statutory functions, and not in relation to any business or commerce - The services included in E-seva/E-governance are rendered for the welfare of citizens and for which the government i.e. service recipient from the appellant, is not earning any profit or doing any business. These are the sovereign function and the statement recorded, by the department of the government officials, also mentioned that these are sovereign functions - The activities intended in the agreement between the appellant and respective State governments are seen to be those that inhere in the State to undertake. Collection of fee is from those citizens or residents to whom the services are provided. For that be to be treated as ‘consideration’ received by appellant without examination of the nature of the agreement is an erroneous conclusion - Moreover, from Circular No.89/7/2006- ST dated 18th December, 2006 of CBEC which was also included in Circular No. 96/7/2007-ST dated 23rd August 2007, it can be seen that authorities are not liable to be taxed for any service which has a statutory mandate - the demand of Service Tax on e-Seva/E-governance service is unsustainable.
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