[Order per : S.S. Kang, Vice-President]. - Heard both sides.
2. Sai Service Station Ltd. is an authorized dealer for cars manufactured and sold by Maruti Udyog Ltd. (MUL) and also engaged in the activity of servicing, repairing the vehicles and selling spares for the vehicles.
3. Proceedings were initiated by issuing show cause notice dated 13-12-2006 demanding Service Tax for the period July, 2003 to March, 2006 on the following counts :-
(a) Commission received from various banks and financial institutions, through M/s. Maruti Udyog Ltd. for promoting, marketing and selling ‘auto Finance’ product under the mark ‘Maruti Finance’. An amount of Rs. 61,82,304/- has been demanded on this count.
(b) Finance Commission received from various banks and financial institutions for arranging ‘Auto Finance’ loan to their prospective buyers, by acting as ‘Direct Sales Agent (DSA)’. An amount of Rs. 40,21,291/- has been demanded towards Service Tax on such commission.
(c) Commission received from M/s. Maruti Udyog Ltd. (M/s. MUL) on account of sales/target incentive, incentive on sale of vehicles and incentive on sale spare parts for promoting and marketing the products of M/s. MUL. Rs. 47,32,807/- has been demanded towards this service.
4. The adjudicating authority in respect of commission received from various banks and institutions through MUL confirmed the demand of Rs. 41,46,054/- and dropped the demand of Rs. 20,36,250/-.
5. In respect of commission received from the banks/finance institutions for arranging auto/finance loan to their prospective buyers by acting as Direct Sales Agents, an amount of Rs. 40,21,291/- is confirmed.
6. In respect of commission received from MUL on account of sales/target incentive, incentive on sale of vehicles and incentive on sale of spare parts for promoting and marketing the products of MUL, the adjudicating authority dropped the demand of Rs. 47,32,807/-.
7. Sai Service Station Ltd. (SSSL) filed appeal against the confirmation of demands with interest and imposition of penalty whereas the Revenue filed appeal against dropping of demands.
8. The contention of the assessee is that the demand is confirmed on the ground that the assessee was providing business auxiliary services under the heading ‘promotion or marketing’. The contention is that in fact the activity undertaken by the assessee comes under the Business Support Service which becomes taxable with effect from 1-5-2006. Hence the demand is not sustainable. The assessee also submitted that as there was confusion during the period in dispute whether the activity undertaken by the assessee comes under the scope of business support service, therefore, the allegation of suppression with intent to evade payment of tax is not sustainable. The assessee relied on the decision in the case of Bridgestone Financial Services v. Commr. of Service Tax, Bangalore - (Tri.-Bang.) and in the case of City Motors & Financial Services v. CCE, Gurgaon - (Tri.-Del.) and other decisions whereby the Tribunal only confirmed the demand for the normal period and demand beyond the normal period and penalties were set aside.
9. The contention of the Revenue is that on merits, the issue is settled by the following decisions of the Tribunal in the case of -
(1) CCE, Jaipur v. Chambal Motors (P) Ltd. - (Tri.-Del.);
(2) City Motors & Financial Services v. CCE, Gurgaon - ;
(3) CCE, Jaipur v. Ajmer Automobiles (P) Ltd. - (Tri.-Del.).
The contention of the Revenue is that in the above decisions, the Tribunal had held that the car dealers promoting to car loans of their client banks/financial institutions are covered under the definition of “business auxiliary service” under Section 65(19) of Finance Act, 1994 and the assessees are promoting and marketing of services provided by the client, the Service Tax is recoverable from the assessees.
10. In respect of time-bar, the contention of Revenue is that prior to 2004, MUL paid Service Tax on commission received from bank and financial institutions and subsequently advised the assessee to get registered with the Service Tax department as provider of business auxiliary service and advised them to pay service tax in respect of commission received from MUL. The contention is that in spite of this advice, the assessee had not paid the Service Tax in respect of the activity which fall under Business Auxiliary service. Hence extended period is rightly invoked.
11. In respect of the appeal filed by the Revenue, the contention of the Revenue is that the adjudicating authority has already dropped the demand of Rs. 20,36,250/- in respect of commission received from MUL for promoting, marketing and selling auto finance under the mark “Maruti Finance”. The contention is that as the activity falls under the business auxiliary service, the assessee is liable to pay Service Tax.
12. In respect of dropping of Rs. 47,32,807/-, the contention is that as the assessees are receiving consideration on account of sales of vehicles and incentive on sale of spare parts for promoting and marketing the products, as these activities are for promoting and marketing of product of MUL, therefore, liable to Service Tax under the heading of business auxiliary service.
13. In reply to the contention raised in the Revenue’s appeal, the contention of the assessee respondent is that MUL has paid the Service Tax on the gross amount received from the bank/finance institutions including the commission passed on the present assessee respondent, therefore, demanding Service Tax on the same amount amounts to double taxation. The Revenue has not challenged the finding of the adjudicating authority that Maruti Finance has already paid Service Tax of Rs. 20,36,250/- on the gross amount received from Bank/finance institution including the commission passed on the present respondent.
14. In respect of the incentive on account of sales/target incentive, incentive on sale of vehicles and incentive on sale of spare parts for promoting and marketing the products of MUL, the contention is that these incentives are in the form of trade discount. The assessee respondent is the authorized dealer of car manufactured by MUL and are getting certain incentives in respect of sale target set out by the manufacturer. These targets are as per the circular issued by MUL. Hence these cannot be treated as business auxiliary service.
15. We find in respect of the commission received from various banks/finance institutions for arranging auto finance loan to their prospective buyers or commission received from MUL where MUL are directly dealing with the bank/finance institutions, we find that the issue is settled in favour of the Revenue in the case of CCE, Jaipur v. Chambal Motors (P) Ltd. In the above decision, the Tribunal held that commission received from various bank/finance institution for arranging loan to their prospective buyers comes under the business auxiliary service. In view of this we find no reason to interfere with the impugned order whereby the demand is confirmed by treating the activities undertaken by the assessee under Business Auxiliary Service.
16. In respect of time-bar, the contention of the assessee is that there was a confusion in the Board’s circular whether the activity comes under the business auxiliary service or not. We find that MUL was paying service tax on the commission received from various banks/finance institutions. MUL advised the assessee to get registered with the Service Tax department and to pay Service Tax on this activity. In spite of this, the assessee had not paid Service Tax though got registered with the Revenue as provider of taxable service in October, 2004. In view of this, we find no merit in the contention of the assessee that the extended period is not invocable.
17. In respect of the appeal filed by the Revenue, we find that MUL has already paid Service Tax of Rs. 20,36,250/- on the gross amount received from various banks/finance institutions including the commission passed on to the assessee. This fact is not under challenge in the present appeal. We, therefore, agree with the assessee that demanding duty on the same amount again amounts to double taxation.
18. In respect of sales/target incentive, the Revenue wants to tax this activity under the category of business auxiliary service. We have gone through the circular issued by MUL which provides certain incentives in respect of cars sold by the assessee-respondent. These incentives are in the form of trade discount. In these circumstances, we find no infirmity in the adjudication order whereby the adjudicating authority dropped the demand. Hence, the appeal filed by the Revenue has no merit.
19. Both the appeals, filed by the assessee as well as by Revenue, are dismissed.
(Dictated in Court)
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