2013 (12) TMI 383 - AT - Service Tax

Waiver of pre-deposit of service tax - Authorized service station - Repair and maintenance of vehicles during the warranty period - The activities undertaken by the dealers of the applicants and the dealers are paying service tax on this activity. Further, the applicants are also taking credit of the service tax paid by the dealers - applicants are financing the vehicles manufactured by them by way of loan. The interest on the loan is not liable to service tax as per the provisions of the Finance Act. In respect of the activity such as processing charges, pre-closure charges, termination charges etc. the applicants are paying appropriate service tax. The applicants are also paying service tax in respect of lease agreements. In cases where the applicants were selling the debits to various banks, we find that the applicants are receiving consolidated amount in respect of the assignment of the loan and the buyer of the debts will get the amount in due course as per the terms and conditions of the loan, under which it has been disbursed to the customers - applicants had undertaken to deposit an amount - Therefore, assessee directed to make a pre deposit - Partial stay granted.

Summary

Issues:
1. Waiver of pre-deposit of service tax of Rs.379.80 crores, interest, and penalties.
2. Demand of Rs.170 crores for repair and maintenance of vehicles during warranty period.
3. Demand of Rs.205 crores for providing banking and financial services.
4. Demand of Rs.1.72 crores for providing authorized service station service.

Analysis:
1. The demand of Rs.170 crores pertains to repair and maintenance of vehicles during the warranty period. The contention was that the applicants, who sell cars to dealers, reimburse dealers for repair and maintenance during the warranty period. Dealers pay appropriate service tax, and applicants avail credit for the same. Despite evidence provided, the demand was upheld based on contractual obligations with customers. However, the Tribunal found strong evidence supporting the applicants' case, as dealers paid service tax and invoices showed compliance, leading to a prima facie case in favor of the applicants.

2. Regarding the demand of Rs.205 crores for banking and financial services, the Revenue argued that the applicants engaged in such services by selling debts to banks. However, the Tribunal noted that interest on loans was not subject to service tax under the Finance Act. The applicants paid tax on processing fees, termination charges, and lease agreements. The sale of debts was analyzed, and it was found that the consolidated amount received was for loan assignment, with buyers receiving payments per loan terms. This analysis supported a strong case for the applicants on this issue.

3. The demand of Rs.1.72 crores was for providing authorized service station services. The Revenue contended that authorized service stations are liable for service tax. The applicants admitted liability for a reduced amount of Rs.55 lakhs, which was directed to be deposited within six weeks. Upon this deposit, the remaining dues' pre-deposit was waived, and recovery stayed during the appeal process. This decision balanced the liability while ensuring due process.

In conclusion, the Tribunal found merit in the applicants' arguments regarding the demands for repair and maintenance during the warranty period and for providing banking and financial services. The decision on the demand for authorized service station services was settled with a partial admission of liability and deposit requirement. The judgment provided a detailed analysis of each issue, considering the legal provisions and evidence presented by both parties, resulting in a balanced and reasoned outcome.