2018 (7) TMI 1384 - AT - Service Tax

Non-payment of Service Tax - servicing of Maruti cars - appellant received certain commissions from various financial institutions for promoting their loan schemes for purchase of Maruti cars by the customers - whether taxable under the head Business Auxiliary Services or not? - Held that - The demand on this ground is upheld in as much as the same is not contested. Any interest payable on such delayed payment of service tax is also upheld - penalty set aside by invoking section 80. Appellant receives certain amount by way of rebates/ discounts/ incentives in the price of the car - whether taxable under the head Business Auxiliary Services or not? - Held that - The discounts/ incentives received by the appellant from the manufacturer of cars will not be liable for payment of service tax - reliance placed in the case of Toyota Lakozy Auto Pvt. Ltd. 2016 (12) TMI 541 - CESTAT MUMBAI - demand set aside. Valuation - inclusion of consumable/ spare parts recovered from the customers in assessable value - Held that - The appellant has been paying VAT on the spare parts/consumables sold to the customer while providing service - reliance placed in the case of Krishna Swaroop Agarwal 2014 (10) TMI 569 - CESTAT NEW DELHI - demand set aside. CENVAT Credit - common input services used in taxable service as well as trading activity - Rule 6(3) of the CCR - Held that - The entire amount of common input service on which cenvat credit has been availed has since been reversed by the appellant - there is no justification for the amount ordered to be paid under Rule 6(3) of the CCR - demand set aside. Appeal allowed in part.

Summary

Issues:
1. Challenge to Order-in-Original regarding service tax demands on certain receipts.
2. Applicability of service tax on commissions received from financial institutions.
3. Liability for service tax on rebates, discounts, and incentives received by the appellant.
4. Inclusion of consumables/spare parts value in consideration charged for servicing vehicles.
5. Reversal of cenvat credit on common input services used for trading service.

Analysis:
1. The appeal contested the Order-in-Original dated 30.04.2015, where the appellant, a dealer of Maruti cars, faced service tax demands. The Department alleged non-payment of service tax on specific receipts, leading to a Show Cause Notice. The impugned order upheld service tax demands, prompting the present Appeal.
2. The first ground for service tax demand was commissions from financial institutions. The appellant acknowledged and paid the service tax amount, leading to a penalty consideration. The Tribunal upheld the demand and interest but waived the penalty under Section 80 of the Finance Act, 1994.
3. Regarding rebates, discounts, and incentives received by the appellant, the Department claimed service tax under business auxiliary service. The appellant argued against this, citing a Tribunal decision involving Toyota Lakozy Auto Pvt. Ltd. The Tribunal analyzed the cited decision and ruled in favor of the appellant, setting aside the service tax demand on this ground.
4. The inclusion of consumables/spare parts value in the service consideration was another point of contention. The appellant contended that since VAT was already paid on these items, service tax was not applicable. Referring to a Tribunal decision in Krishna Swaroop Agarwal, the Tribunal agreed with the appellant and set aside the service tax demand related to consumables/spare parts.
5. The final issue revolved around the reversal of cenvat credit on common input services used for trading activities. The appellant reversed the entire amount of common input services for which cenvat credit was availed. Citing a decision by the Hon'ble Allahabad High Court, the Tribunal ruled in favor of the appellant, setting aside the demand for payment under Rule 6(3) of the Cenvat Credit Rules. Overall, the Tribunal modified the impugned order, upholding the service tax demand on commissions from financial institutions while setting aside the rest of the service tax demands.

Conclusion:
The Tribunal partially allowed the Appeal, modifying the impugned order to uphold the service tax demand on commissions from financial institutions while setting aside the remaining service tax demands. The decision was pronounced on 22.06.2018.