2010 (11) TMI 325 - AT - Service Tax

Demand along with penalties - Recovery of the amounts collected from the manufacturers -  The assessees herein are providers of taxable services under the category of Authorised Service Station to various customers of M/s. Hero Honda Motors Ltd - The submission of the assessees that the excess amount collected from M/s. Hero Honda is not required to be credited into the account of the Central Government under Section 11D for the reason that during the period in dispute, Section 11D provided for credit into the government account of an amount collected in excess of the duty assessed or determined, from the buyer of such goods. Held that the demand is on the amount reimbursed by M/s. Hero Honda who is not the buyer of the goods - Therefore,accept the contention of the assessees that they are not liable to pay the amount collected from M/s. Hero Honda to the credit of the Central Government - Therefore, the demands of tax are not sustainable - As a consequence, no penalty can be imposed upon the assessees.

Summary

Issues:
Interpretation of Section 11D regarding crediting excess tax collected into the government account; Liability of the assessees to pay the amount collected from a manufacturer to the Central Government; Validity of tax demands and penalties imposed.

Analysis:
The case involved assessees providing taxable services as an "Authorised Service Station" to customers of a manufacturer. The assessees collected service tax from the manufacturer but did not credit 50% of the tax reimbursed by the manufacturer to the government account as per Section 11D. The adjudicating authority confirmed the demands and imposed penalties, which were upheld by the Commissioner (Appeals) regarding tax demands but penalties were set aside due to lack of conclusive proof of intention to evade service tax.

Upon hearing both sides, it was argued that the excess amount collected from the manufacturer should not be credited to the government account under Section 11D. The judge accepted the contention that the assessees were not required to pay the amount collected from the manufacturer to the Central Government as the section applied to amounts collected in excess from buyers, not manufacturers. Since the amount collected from buyers was already credited to the government account, the demands of tax were deemed unsustainable, leading to the dismissal of penalties against the assessees.

Consequently, the Appeals of the assessees were allowed, while the Appeals of the Revenue were dismissed. The cross-objections filed by the assessees were also dismissed as they were merely comments on the Revenue's appeal. The operative part of the order was pronounced on 25-11-2010.