2015 (8) TMI 353 - AT - Service Tax

Taxability of incentives & reimbursements received from MUL - authorized dealer of Maruti Udyog Limited (MUL) - Business Auxiliary Service - Held that - Appellant has mainly argued on the parameters that various incentives given by MUL, on which service tax demand is proposed to be raised under BAS, are of the nature of trade discounts based on performances or are simply certain reimbursements made by MUL for Sales/Joint benefit, which can not be considered as provision of Business Auxiliary Services - There is no evidence on record that in the present appeal also any separate consideration is received by the appellant from either MUL or the customers for providing such free service. Accordingly it is held that no service tax is payable on the free service provided by the appellant. - Appellant also argued that with respect to demands raised; under the head of Workshop Service charges for financial year 2003-2004, 2004-2005 and demand under delayed payment of service tax for financial year 2003-2004; they have been able to reconcile certain payments made which clearly indicate that more service tax has been paid then what is demanded. We find that such a verification of claims made by the appellant can only be properly done by the Adjudicating Authority. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Appeal against OIO confirming demand of service tax, interest, and penalties under Finance Act, 1994 for various incentives and reimbursements received from Maruti Udyog Limited (MUL).

Detailed Analysis:

Issue 1: Classification of Incentives and Reimbursements
- Appellant argued that incentives and reimbursements received from MUL are trade discounts or reimbursements, not Business Auxiliary Services (BAS).
- Cited case laws to support the argument that various incentives are performance-based trade discounts and not taxable under BAS.
- Appellant contended that the incentives are compensatory payments or mutually beneficial activities, not taxable services under Section 65(19) of the Finance Act, 1994.
- Tribunal agreed with the appellant's arguments, holding that the payments received cannot be classified as BAS commissions.

Issue 2: Commission on Extended Warranty
- Appellant received a commission for providing after-sales services on behalf of MUL, considered as a service under BAS by the Adjudicating Authority.
- Tribunal upheld the Adjudicating Authority's decision, stating that such commissions fall under the definition of BAS under Section 65(19) of the Finance Act, 1994.

Issue 3: Maruti Online Services (MOSS)
- Appellant provided mobile vehicle services for Maruti customers, reimbursed by MUL, argued as not a BAS by the appellant.
- Tribunal held that such services provided on behalf of MUL are taxable under BAS as per Section 65(19)(iii) of the Finance Act, 1994.

Issue 4: Free Services Charges
- Appellant claimed no separate charges from MUL for free services, met expenses from dealer's margin.
- Tribunal referred to a case law to determine that no service tax is payable on free services provided by the appellant.

Issue 5: Exchange Charges True Value (TV) and Non-TV
- Appellant engaged in buying and selling used cars, argued as not a BAS activity.
- Tribunal agreed with the appellant, stating that such activities are buying and selling, not BAS under Section 65(19) of the Finance Act, 1994.

Issue 6: Workshop Service Charges and Delayed Payment
- Appellant reconciled payments indicating overpayment, sought verification by the Adjudicating Authority.
- Tribunal remanded the issue for verification, allowing the appellant a personal hearing, and instructed the Adjudicating Authority to decide on penalties in the remand proceedings.

Conclusion:
The appeal was allowed based on the arguments presented, with the Tribunal ruling in favor of the appellant on various issues related to the classification of incentives, commissions, services, and charges, remanding specific matters for further verification and decision by the Adjudicating Authority.