2008 (7) TMI 353 - AT - Service Tax

Appellants, dealers of M/s. Maruti Udyog Ltd. - certain Finance Company and Insurance Company pay commission to manufacturer (M/s. Maruti) in respect of vehicles routed through appellants and a portion of the said commission is paid to the appellants by M/s. Maruti Udyog Ltd. - M/s. Maruti Udyog Ltd. had already discharged the service tax liability on the commission received impugned demand is under the category of Business Auxiliary Services in respect of the portion of the commission received - same issue had been dealt with in the decision of this Bench in Tata Motors Insurance Services Ltd. case supra - prima facie a strong case has been made out - full waiver of pre-deposit granted

Summary

Issues:
1. Whether the appellants are liable to pay service tax under the category of "Business Auxiliary Services" for the commission received from M/s. Maruti Udyog Ltd.
2. Whether the appellants are rendering services to M/s. Maruti Udyog Ltd. or the Finance Company and Insurance Company.
3. Whether the appellants should be required to pre-deposit the service tax amount and penalty.
4. Whether the appellants' case is similar to the decision in Tata Motors Insurance Services Ltd. case.
5. Whether the appellants are promoting the business of the Insurance Company and Finance Company.

Analysis:
1. The appellants, dealers of M/s. Maruti Udyog Ltd., receive commission from the company for vehicles routed through them. The Revenue demanded service tax under "Business Auxiliary Services" on this commission. The appellants argued that they are not rendering services to M/s. Maruti Udyog Ltd. or the Finance and Insurance Companies. They contended that M/s. Maruti Udyog Ltd. had already paid service tax on the commission received from the Insurance Company, leading to potential double taxation.

2. The Revenue asserted that the appellants promote the businesses of the Insurance and Finance Companies, justifying the classification of the commission as "Business Auxiliary Services." The appellants referenced a previous decision involving Tata Motors Insurance Services Ltd., where a similar issue was addressed, and a stay was granted on the pre-deposit of service tax.

3. After careful consideration, the Tribunal found similarities between the current case and the Tata Motors Insurance Services Ltd. case. Given the strong prima facie case and the previous decision's implications, the Tribunal granted a full waiver of the pre-deposit of service tax and penalty, staying its recovery until the appeal's disposal. The Tribunal also expedited the matter due to the significant amount involved.

4. The Tribunal emphasized the importance of revenue neutrality and the potential for double taxation if the appellants were to pay service tax on the commission already taxed by M/s. Maruti Udyog Ltd. The decision aimed to prevent unjust enrichment and ensure fairness in the tax treatment of the transactions involved.

5. The judgment highlighted the need for a thorough examination of the nature of the services provided by the appellants and the justification for imposing service tax under the "Business Auxiliary Services" category. The decision underscored the significance of legal precedents and the principles of equity in resolving tax disputes effectively.