2007 (8) TMI 638 - AT - Service Tax

Business Auxiliary Services - commission from various insurance companies for promoting their business by way of insuring the new vehicles through their company - incentive received from the principal supplier based on the quantum of off-take, early bird incentive and other target achievement incentive on purchase of cars and spares.

Summary

Issues:
1. Requirement of pre-deposit of service tax amount
2. Allegation of promoting business for finance and insurance companies
3. Levy of service tax on commission from principal supplier
4. Barred by time defense for demands
5. Nature of discount received and its classification as commission

Analysis:

1. The judgment addressed the requirement of pre-deposit of service tax amount totaling Rs. 29,42,451/- imposed on the appellant. The appellant had already paid a partial amount along with interest. The remaining sum to be deposited was specified, along with penalties under various sections of the Finance Act. The Revenue alleged that the appellant was involved in promoting the business of finance and insurance companies, leading to the demand for service tax under "Business Auxiliary Services" from 1-7-2003 as defined under Section 65(19) of the Act.

2. The appellant contested the levy of service tax on the commission received from the principal supplier, arguing that the incentives received were in the nature of discounts based on off-take of vehicles and not linked to any service. The appellant claimed that they were the owners of the vehicles and sold them on their own right, receiving discounts which should not be considered as commission. The Revenue did not accept this argument, leading to the dispute.

3. The judgment considered the prima facie submission by the appellant's counsel, acknowledging a strong case in favor of the appellant on merits. It was noted that the appellant's contention of being the owner of the vehicles and receiving discounts, not commissions, was acceptable. The stay application was allowed unconditionally, waiving the pre-deposit amount and staying its recovery until the appeal's disposal, indicating a favorable stance towards the appellant's arguments.

4. Additionally, the appellant raised a defense of demands being barred by time due to the nature of their transactions and their belief that service tax was not applicable in such transactions. This defense was considered in the judgment, although the primary focus remained on the classification of discounts received and the applicability of service tax on the same.

5. In conclusion, the judgment highlighted the appellant's argument regarding the nature of discounts received and their classification as commission for the purpose of service tax liability. The decision to allow the stay application and the favorable assessment of the appellant's contentions indicated a potential shift in favor of the appellant's position, pending the final hearing of the appeal.