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2017 (5) TMI 102 - AT - Service TaxBusiness Auxiliary Service - liability of tax - During the course of their business, they also help and guide their customers to get loan from banks for buying car. They also help the bank to enforce and recover amount from defaulters. In consideration of the said activities, the appellants get remuneration from banks/financial institutions - whether the appellant is liable to pay tax on such remuneration? - Held that - The Board vide Circular dated 20.06.2003 clarified the scope of activities covered under Business Auxiliary Services . Among other things, service provided in relation to getting a customer, verification of prospective customer, etc. are clarified to be covered by the tax entry - Reading together the statutory scope of the tax entry as above and the activities carried out by the appellant as narrated in the agreement, it is clear that the activities of the appellant are covered by the tax entry Business Auxiliary Service . Invocation of section 73(3) - validity of SCN and proceedings initiated against assessee - the appellant deposited the service tax along with interest during the course of investigation itself - Held that - the service tax due on taxable services were discharged by the appellant, though belatedly, with interest, upon initiation of enquiry by the department. In normal course, service tax is self assessed by the assessee. Here, the tax liability not paid in time was pointed out and as such paid later. Such payment is towards tax dues and cannot be considered as a deposit of amount for undetermined liability to be decided in future. The appellants paid service tax as per the obligation cast on them in terms of Section 68 of FA, 1994. We have already held that upon payment of such tax due, the provisions of Section 73(3) will come into play in the present case. Refund of excess amount paid by assessee - Held that - The appellants shall be entitled for return of excess amount of tax, if any, paid by them. They have claimed that there is error in totaling the amount received as consideration from the banks. We find that this requires verification and the Original Authority can examine the correct factual position with records for settling the request made by the appellant regarding excess payment. Concession under Section 67(2) - Held that - When the gross amount received by the appellant has been taken into account for calculating service tax, concession under Section 67(2) can be considered where there is no service tax element separately shown in the documents. We direct that the jurisdictional authority to verify whether there is any indication regarding service tax in the invoices etc. issued by the appellant. The appellants are liable to service tax during the material time. The correct amount of tax liable to be paid shall be cross verified by the jurisdictional authorities to examine the claim of excess payment and claim for cum tax benefit by the appellant. In case of excess payment on these grounds the same shall be refunded to the appellant subject to refund provisions - the case was fit for closure u/s 73(3) of the FA, 1994 and as such, penalties imposed on the appellant are set aside. Appeal partly allowed and part matter on remand.
Issues Involved:
1. Tax liability under "Business Auxiliary Service." 2. Legality of the show cause notice and proceedings. 3. Applicability of Section 73(3) of the Finance Act, 1994. 4. Claim for refund of service tax paid. 5. Cum-tax benefit under Section 67 of the Finance Act, 1994. 6. Imposition of penalty under Section 78 of the Finance Act, 1994. Issue-wise Analysis: 1. Tax Liability under "Business Auxiliary Service": The appellants, acting as car dealers, facilitated loans for customers from banks and received remuneration for these services. The central issue was whether these activities fell under "Business Auxiliary Service" (BAS) as defined in Section 65(19) of the Finance Act, 1994. The Tribunal examined the statutory scope of BAS and the nature of activities performed by the appellants, concluding that the activities of promoting and marketing car loans for banks indeed fell under BAS. This was supported by previous Tribunal decisions, such as Jay Bharat Automobiles and Roshan Motors Ltd., which held that similar activities were taxable under BAS. 2. Legality of the Show Cause Notice and Proceedings: The appellants argued that the show cause notice issued after they had already paid the service tax with interest was not legally justifiable. They contended that the issue was one of legal interpretation, and there was no willful suppression of facts. The Tribunal noted that the appellants had paid the service tax upon inquiry by the department and were not registered or paying service tax during the relevant period. However, it was determined that the issuance of the show cause notice was not justified since the appellants had already settled the tax dues with interest. 3. Applicability of Section 73(3) of the Finance Act, 1994: Section 73(3) stipulates that if the service tax and interest are paid before the issuance of a show cause notice, no notice should be served. The Tribunal found that the appellants' case fit within the provisions of Section 73(3), as they had paid the tax and interest before the notice was issued. The Tribunal concluded that the proceedings should have been closed under Section 73(3) and that the subsequent actions by the Revenue were unwarranted. 4. Claim for Refund of Service Tax Paid: The appellants claimed that the service tax was paid under the influence of the department and sought a refund. The Tribunal found no merit in this claim, stating that the appellants had paid the tax as per their legal obligation and had filed the necessary returns. However, the Tribunal allowed for the verification of any excess payment made by the appellants, directing the Original Authority to examine the records and settle any excess payment claims. 5. Cum-tax Benefit under Section 67 of the Finance Act, 1994: The appellants sought cum-tax benefit, arguing that the gross amount received should be considered inclusive of service tax. Section 67(2) allows for this benefit if the service tax element is not separately indicated in the invoices. The Tribunal directed the jurisdictional authority to verify the invoices and, if no separate service tax was shown, to apply the provisions of Section 67(2) and adjust the tax liability accordingly. 6. Imposition of Penalty under Section 78 of the Finance Act, 1994: The Tribunal found that the penalties imposed under Section 78 were not justified, given that the appellants had paid the service tax with interest before the issuance of the show cause notice. The Tribunal set aside the penalties, emphasizing that the case should have been closed under Section 73(3). Conclusion: The Tribunal concluded that the appellants were liable for service tax under BAS during the relevant period. However, it directed the jurisdictional authorities to verify the claims of excess payment and cum-tax benefit. The penalties imposed were set aside, and the appeal was partly allowed in these terms. The order was pronounced on 28.04.2017.
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