2019 (9) TMI 1357 - AT - Service Tax

Business Auxiliary Service - commission received from the bank - whether the appellant was required to pay service tax on net amount of services received by them or on the gross value of the service tax received by them? - CBEC Circular No. 87/05/2006-ST dated 06.011.2006 - extended period of limitation - HELD THAT - On going through the circular, it is found that on 06.11.2006, revenue has explained that the appellant was required to pay service tax on gross amount, and thereafter, on 16.11.2006, the show cause notice was issued whereas the appellant was filing their ST-3 Returns regularly and paying service tax thereon, in that circumstances, the extended period of limitation is not invokable. As the same view was taken by the Tribunal in the case of South City Motors Ltd 2011 (11) TMI 408 - CESTAT, NEW DELHI , therefore, the show cause notice issued by the appellant is barred by limitation, hence, impugned demands are not sustainable as appeal succeeds on limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant was required to pay service tax on net amount or gross amount of services received.
2. Whether the extended period of limitation for the show cause notice was invokable.

Analysis:
1. The appellant, an Authorized Service Station, was providing "Business Auxiliary Service" by referring customers to a bank for car loans and receiving commission. The appellant paid service tax on the net amount realized after deducting expenses, instead of the gross amount. A show cause notice was issued invoking the extended period of limitation. The appellant argued that ambiguity existed regarding whether service tax should be paid on net or gross amount, citing a CBEC Circular. The appellant contended that the demand was barred by limitation, referencing a Tribunal decision in a similar case.

2. The Revenue contended that the circular clarified service tax should be paid on the gross amount, justifying the invocation of the extended period of limitation. The Tribunal analyzed the CBEC Circular, which emphasized that service tax is payable on the gross commission received. As the appellant had been regularly filing returns and paying service tax based on the net amount, the Tribunal held that the extended period of limitation was not applicable. Citing the Tribunal's decision in a similar case, the show cause notice was deemed barred by limitation, leading to the impugned demands being unsustainable. The Tribunal allowed the appeal, setting aside the impugned order and providing consequential relief to the appellant.