2026-VIL-1342-CESTAT-HYD-ST
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SERVICE TAX CESTAT Cases

Service Tax – Activity of testing Dielectric strength of Transformer Oil and Protective Relays and issuance of Test Certificates – Demand under Business Auxiliary Services - Appellant collected certain amounts termed as liaison charges. Revenue formed view that liaison charges were taxable under BAS - Whether liaison charges collected by testing and certification service provider constitute taxable Business Auxiliary Services under Section 65(19) of Finance Act, 1994 - HELD - Business Auxiliary Service is wide but structural definition where each limb constitutes separate taxable activity. Classification under BAS cannot be made in generic terms. On perusal of Show Cause Notice, Department merely reproduced entire definition of BAS without satisfying whether Appellant promoted client's business, whether service was rendered on behalf of client, whether activity falls under clause relating to incidental service or under which precise statutory limb tax is proposed. This omission goes to root of proceedings - Show Cause Notice is foundation of adjudication and if foundation is defective, subsequent proceedings cannot survive. Under BAS there are seven sub-clauses and noticee will not be aware as to precise ground on which tax is proposed to be demanded unless sub-clause is specified - Even on merits, Revenue has not established how liaison charges amount to Business Auxiliary Services. No evidence on record showing Appellant promoted client's business, marketed services, procured customers, rendered customer care or acted as commission agent. Mere collection of liaison charges or reimbursement cannot automatically become Business Auxiliary Service. Taxability cannot be based on presumption. Show Cause Notice suffers from incurable vagueness – The impugned order is set aside and appeal is allowed
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