2012 (6) TMI 272 - AT - Service Tax

Penalty - authorized service station - liability of Service Tax on the incentive received from the bank, who provided finance to the purchaser of the vehicles - Revenue alleged suppression of facts - period involved June 2003 to June 2005 - Held that - Issue has finally being clarified by the Board vide Circular No.87/05/2006-ST, dt.6.11.2006. Commissioner has rightly waived penalty relying upon decision rendered in case of Akar Motors vs CCE (2010 (8) TMI 213 (Tri)) wherein it is held that in situations where Board issued a clarification that there was doubts and clarifies the doubts, persons who are liable to service tax cannot be held to be liable to suppression of facts and imposition of penalty - Decided against the Revenue

Summary

Issues:
Service Tax liability on incentive received by authorized service stations, imposition of penalty based on awareness of liability and suppression of facts.

Analysis:

Issue 1: Service Tax liability on incentive received by authorized service stations
The appellants, authorized service stations, were demanded Service Tax on the incentives received from a bank providing finance to vehicle purchasers. The respondents did not dispute the liability and paid the tax with interest pre-emptively. The Commissioner (Appeals) ruled no penalty was applicable, citing a Tribunal decision in a similar case. The Revenue appealed, arguing that as authorized service stations, the appellants were aware of their liability, invoking suppression of facts and seeking penalty imposition.

Issue 2: Imposition of penalty based on awareness of liability and suppression of facts
The Tribunal found the facts in the present cases akin to the Aakar Motors case, where the liability of Service Tax on incentives received by authorized service stations was clarified by a Board Circular. The period in question for M/s Ruhi Motors was from June 2003 to June 2005 and for M/s Raghuwanshi Motors from July 2004 to March 2005. Relying on the Aakar Motors decision and the similarity of facts, the Tribunal rejected the Revenue's appeals, stating that the view taken in Aakar Motors applied to the present cases as well, leading to the dismissal of the appeals.

This judgment highlights the importance of consistency in applying legal principles across similar cases and the relevance of official circulars in clarifying tax liabilities. It underscores the need for a thorough understanding of tax obligations by authorized service stations and the repercussions of suppression of facts in tax matters.