2018 (8) TMI 701 - AT - Service Tax

Scope of SCN - Held that - The order passed by the Commissioner in Order-in-Review in terms of Section 84 of the Finance Act, 1994, clearly transgressed the scope of the initial show-cause notice. The initial show-cause notice demanded service tax under the category of C & F Agents. While passing the Review order, the Commissioner has held that the services rendered by the appellants fall under Business Auxiliary Service . For this reason itself, the impugned order is fit to be set aside. The impugned order does not survive on merits either. The learned Commissioner while holding the service to be Business Auxiliary Service has held that exemption as per N/N. 13/2003-ST is not applicable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Taxation of commission received by appellants under 'Clearing and Forwarding Agency' Service; Scope of services provided by appellants to local companies; Applicability of 'Business Auxiliary Service'; Denial of exemption under Notification No.13/2003-ST.

Analysis:
1. The appellants, engaged in manufacturing and selling cars, permitted two local companies to sell lubricants using the brand name 'Toyota' for a commission. The department sought to tax this commission as 'Clearing and Forwarding Agency' service. The Commissioner confirmed the demand based on a Tribunal judgment, categorizing the services under 'Business Auxiliary Service' from 1.7.2003 onwards.

2. The appellants argued that they did not act as a Clearing and Forwarding Agent, as initially alleged. The Commissioner's decision exceeded the scope of the original proceedings, denying the appellants the benefit of an exemption under Notification No.13/2003-ST. The appellants cited cases where similar services were exempted by the Tribunal.

3. The Tribunal found that the Commissioner's decision transgressed the initial show-cause notice by categorizing the services under 'Business Auxiliary Service' instead of 'Clearing and Forwarding Agency'. The denial of exemption under Notification No.13/2003-ST was deemed incorrect based on Tribunal precedents.

4. Ultimately, the Tribunal allowed the appeal, setting aside the Commissioner's order and ruling in favor of the appellants. The decision was based on the incorrect categorization of services and the flawed denial of exemption under Notification No.13/2003-ST.

Conclusion:
The judgment by the Appellate Tribunal CESTAT Bangalore dealt with the taxation of commission received by appellants for permitting local companies to sell lubricants using the brand name 'Toyota'. The Tribunal overturned the Commissioner's decision to categorize the services under 'Business Auxiliary Service' instead of 'Clearing and Forwarding Agency', and also disagreed with the denial of exemption under Notification No.13/2003-ST. The appeal was allowed in favor of the appellants.