2025-VIL-1047-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax - Business Auxiliary Service - Classification and Taxability of Data Processing Services – Appellant is a BPO unit engaged in data processing and IT enabled services - Whether data processing services provided by the appellant constitute Business Auxiliary Service under Section 65(19) of the Finance Act, 1994 and are liable to service tax for the period 2006-07 and 2007-08 – HELD - The services provided by the appellant do not fall under any of the specific categories enumerated under Business Auxiliary Service as defined in Section 65(19) of the Finance Act, 1994. The appellant was directly providing data processing services to clients on a principal-to-principal basis without involvement of any third party, and was not engaged in promotion, marketing, customer care services, procurement, or provision of services on behalf of clients - The definition of Business Auxiliary Service specifically excluded Information Technology Service, and data processing services fell under this exclusion until May 16, 2008. The Revenue failed to identify under which specific clause of Business Auxiliary Service the appellant's activities would be covered. The burden of proof lies on the Revenue to establish that the activities are covered under BAS, which burden has not been discharged - the demand of service tax under Business Auxiliary Service cannot sustain as the Revenue failed to identify the exact nature of service as provided under BAS – The appeal is allowed - Revenue Neutrality - Joint Service Provision - Whether service tax liability can be imposed on the appellant when service tax has already been paid by the co-vendor on the entire consideration under a Joint Service arrangement – HELD - Where two service providers jointly provide services under a cost-sharing arrangement and one of them has already discharged the service tax liability on the entire consideration, no further liability can be imposed on the other service provider. The exercise becomes revenue-neutral as the service tax paid by one party would be eligible as CENVAT credit to the other party. There was no sub-contracting arrangement or service provider-service recipient relationship between the appellant and Wintec, and the appellant had not outsourced any part of their work to Wintec - No service tax liability could be imposed on the appellant as the service tax liability on the entire consideration had already been discharged by the co-vendor, making the entire exercise revenue-neutral.
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