2018 (6) TMI 807 - AT - Service Tax

Levy of Service Tax - certain receipts by the appellant a dealer of motor vehicles for the disputed period under the fact that they have filed their ST-3 returns periodically and paid the admitted taxes - extended period of limitation - Held that - The appellant have made proper compliances by maintaining proper books of accounts recording all the transactions and also filed their periodical returns which have not been found to be untrue by the Revenue. Hence there is no case of contumacious conduct on the part of the appellant. Accordingly the demand for the extended period of limitation is not sustainable. The appellant have claimed that certain receipts which were earlier being shown under the category of Authorized Service Station have been in the later years 2010 11 and 2011 12 disclosed under the head Business Auxiliary Service . Accordingly matter remanded for the normal period to the Original Adjudicating Authority with the direction to hear the appellant considering the explanation and the supporting documents Appeal allowed in part and part matter on remand.

Summary

Issues Involved:
1. Levy of Service Tax on certain receipts.
2. Invocation of the extended period of limitation.
3. Classification of various receipts under taxable services.
4. Imposition of penalty under Section 78 of the Finance Act.

Issue-wise Detailed Analysis:

1. Levy of Service Tax on Certain Receipts:
The appellant, a dealer of Hyundai Motors India Ltd., was engaged in servicing, repair, and sales of motor vehicles. The Revenue scrutinized the appellant's ST-3 returns and found discrepancies in the declared income from various sources such as workshop receipts, discounts, incentives, and commissions. The Revenue determined that these receipts were taxable under 'Authorized Service Station' and 'Business Auxiliary Services' categories, resulting in a short payment of Service Tax amounting to ?1,27,17,906/-. The appellant argued that these receipts were trading receipts and not taxable. The Tribunal found that most of these receipts were indeed trading receipts based on precedents set by previous rulings.

2. Invocation of the Extended Period of Limitation:
The Revenue invoked the extended period of limitation, alleging suppression of facts by the appellant. The appellant contended that they had regularly filed their returns and maintained proper books of accounts, thus there was no suppression or misstatement. The Tribunal agreed with the appellant, stating that there was no evidence of contumacious conduct, and hence, the extended period of limitation was not sustainable.

3. Classification of Various Receipts Under Taxable Services:
The Tribunal examined the nature of various receipts, such as workshop receipts, warranty receipts, migration service income, and different types of incentives and commissions. The appellant provided detailed explanations for each type of receipt, arguing that many were in the nature of trade discounts or reimbursements from the manufacturer and should not be classified as taxable services. The Tribunal found merit in the appellant's explanations and referenced several case laws that supported the classification of these receipts as non-taxable trading receipts. However, the Tribunal noted that receipts from insurance and finance companies needed further detailed examination.

4. Imposition of Penalty Under Section 78 of the Finance Act:
The Revenue had imposed an equal amount of penalty under Section 78 of the Finance Act along with the demand for interest under Section 75. The appellant contested the penalty, arguing that there was no suppression or misstatement of facts. The Tribunal agreed with the appellant, setting aside the penalty under Section 78, as there was no evidence of intentional evasion of tax.

Conclusion:
The Tribunal allowed the appeal in part, remanding the matter for the normal period to the Original Adjudicating Authority to re-examine the classification of receipts and consider the appellant's explanations and supporting documents. The Tribunal directed the appellant to seek a hearing within 60 days and clarified that the penalty under Section 78 was not imposable. The decision emphasized that the appellant had made proper compliances and maintained transparency in their transactions.