2013 (4) TMI 3 - AT - Service Tax

Classification of Services - Valuation - extended warranty services - Authorized Service Station Service or Business Auxiliary Service - Held that - Commissioner (Appeals) has confirmed the demand of service tax and appropriated the amount paid by them under the category Business Auxiliary Service . Therefore the learned Commissioner (Appeals) has travelled beyond the show-cause notice Even though the payment was made under Business Auxiliary Service by the appellant in July and August 2007 with interest, it is surprising that the show-cause notice was issued on 25-3-2008 proposing to demand service tax on the entire amount of premium. The submission that Commissioner (Appeals) travelled beyond the show-cause notice has to be upheld. Further the appellants are not challenging the demand for service tax and appropriation of the amount of service tax and interest paid by them and therefore whatever has been paid and appropriated has to be upheld. - When Demand itself is not sustainable, the imposition of penalty under Section 76 of Finance Act, 1994 cannot be sustained. - Decided in favor of assessee.

Summary

Issues:
1. Classification of services rendered by the appellant under "Authorized Service Station Service" or "Business Auxiliary Service."
2. Demand of service tax, interest, and penalties by the Department.
3. Imposition of penalty under Section 76 of the Finance Act, 1994.

Analysis:
1. The appellant, an authorized dealer and service provider for a motor vehicle brand, was providing extended warranty services to customers without disclosing it to the Department. The Department issued a show-cause notice demanding service tax for the period from 1-10-2002 to 30-6-2007. The adjudicating authority classified the services under "Authorized Service Station Service," demanding service tax, interest, and penalties. The Commissioner (Appeals) set aside the demand under this category, holding that the appellant was not liable for it. The Commissioner directed the re-quantification of demand under "Business Auxiliary Service" and set aside penalties under Sections 77 and 78, except for penalty under Section 76, which the appellant challenged.

2. The appellant contended that the Commissioner exceeded the show-cause notice's scope by confirming the demand under "Business Auxiliary Service." The appellant voluntarily paid service tax under this category before the notice was issued. The Tribunal agreed that the demand under "Authorized Service Station Service" was not sustainable, as the appellant had already paid under "Business Auxiliary Service." The Tribunal upheld the payment and appropriation made by the appellant, setting aside the penalty under Section 76 of the Finance Act, 1994. The Tribunal concluded that the penalty imposition was not justified, given the circumstances.

3. The Tribunal upheld the appropriation of service tax and interest paid by the appellant, as it was not contested. However, the imposition of penalty under Section 76 of the Finance Act, 1994 was set aside, and the appeal was allowed to that extent. The Tribunal found that the Commissioner had exceeded the scope of the show-cause notice, leading to the incorrect imposition of penalties. The appellant's voluntary payment under "Business Auxiliary Service" was considered valid, and the penalty under Section 76 was deemed unsustainable in light of the circumstances.