2018 (10) TMI 562 - AT - Service Tax

Taxability - extended warranty services on vehicles provided to customers - part of amount retained by appellant - case of Revenue is that the amount retained by the appellant is taxable under authorised service station services and appellant is liable to pay service tax on the amounts retained with applicable interest. Held that - The genesis of the issue as to what is the amount retained by the appellant in the entire case records has not been considered by the lower authorities in these proceedings. The affidavit filed by the appellant herein indicates some figure which needs to be considered by the first appellate authority to arrive at a conclusion as to whether the refund application filed by the appellant is acceptable or otherwise. The issue of correct tax liability on the amounts retained by the appellant needs to be considered, then the adjudicating authority needs to reconsider the issue in respect of correct amount retained - the matter is remitted back to the adjudicating for coming to a conclusion after considering all the records that may be produced by the appellant - Appeal allowed by way of remand.

Summary

Issues Involved:
1. Discharge of service tax liability on extended warranty amounts received.
2. Rejection of refund claim by the original authority.
3. Correct tax liability determination on the amounts retained by the appellant.

Analysis:

Issue 1: Discharge of service tax liability on extended warranty amounts received
The appeal was against an order confirming a demand notice for service tax on extended warranty amounts not offered for taxation by the appellants. The lower authorities held the appellants liable for service tax on the amounts retained from extended warranty collections. The appellant contended that they had remitted most amounts to the principal company and retained only a specific portion, arguing that service tax was due only on the retained amount. The first appellate authority's previous order supported this view. The Tribunal found that the lower authorities failed to consider the actual amount retained by the appellant, which was crucial in determining the correct tax liability. The Tribunal remitted the matter to the adjudicating authority for a detailed reconsideration based on the appellant's submissions and documents.

Issue 2: Rejection of refund claim
The original authority rejected the appellant's refund claim for the pre-deposit made during the proceedings. The appellant argued that since they had already paid a substantial amount towards the service tax liability on the retained amounts, they were entitled to a refund of the excess pre-deposit. The Tribunal noted that the lower authorities did not adequately assess the amount retained by the appellant, leading to the incorrect rejection of the refund claim. The Tribunal directed the adjudicating authority to reassess the correct amount retained by the appellant to determine the refund eligibility accurately.

Issue 3: Correct tax liability determination on the amounts retained
The Tribunal emphasized the importance of determining the precise amount retained by the appellant from the extended warranty collections to establish the correct tax liability. The Tribunal highlighted that the previous order-in-appeal, which was not contested by either party, supported the view that service tax was applicable only on the retained amounts. The Tribunal instructed the adjudicating authority to carefully evaluate the appellant's submissions and documents to arrive at a conclusive decision on the tax liability. The Tribunal stressed the need for natural justice principles to be followed during the reconsideration process.

In conclusion, the Tribunal remitted the case to the adjudicating authority for a detailed reassessment of the correct tax liability on the amounts retained by the appellant, ensuring a fair consideration of all relevant documents and submissions in accordance with the principles of natural justice.