2011 (8) TMI 81 - AT - Service Tax

Demand - authorised service station - Circular No. 87/05/2006-ST dated 06.11.2006 - The issues considered by the Board in the Circular was liability of service on free services given by the authorised dealers for which they are reimbursed by the manufacturers and commission/ incentive received by them from banks/ non-banking financial companies for introducing customers for finance/ loans - In view of the Circular issued by the Board and in view of the decisions cited above, I take a view that appellants are not liable to any penalty and Section 80 of Finance Act, 1994 is required to be invoked in this case on the ground that there was sufficient cause for non payment of duty - Appeal is allowed

Summary

Issues: Service tax liability on complimentary and warranty services provided by an authorised service station, and commission/incentive received from banks or financial institutions.

The judgment by the Appellate Tribunal CESTAT, Ahmedabad addressed the issue of service tax liability on complimentary and warranty services provided by an authorised service station, along with commission/incentive received from banks or financial institutions. The appellant, an authorised service station, had service tax demand made against them for these services provided to customers. The appellant had paid the full amount of service tax and interest for the period from 2002-03 to 30.09.2006, which was not being disputed. The appellant argued that there was confusion and doubts regarding the service tax liability for these services. The appellant relied on various decisions of the Tribunal and a clarification issued by the Board to support their case. The Board's Circular clarified the liability of service tax on free services provided by authorised dealers and commission/incentives received from banks, indicating the existence of doubts and confusion in the field before 06.11.2006. The Tribunal had previously held in other cases that no penalty was imposable on assessees for these services. The judgment referred to specific cases where it was held that no penalty was liable for service tax on free services and commissions. Based on the Circular and previous decisions, the Tribunal concluded that the appellants were not liable for any penalty, invoking Section 80 of the Finance Act, 1994, due to reasonable cause for non-payment of duty. Consequently, the appeal was allowed in favor of the appellants with consequential relief granted.