2019 (10) TMI 324 - AT - Service Tax

Business Auxiliary Service - amount collected from the customers under the new scheme called Passport Bonus Card Scheme on behalf of the manufacturer for servicing of motor vehicles and for benefits after the warranty period - period 2004-05 to 2008-09 - HELD THAT - The appellants were only collecting the amount on behalf of the manufacturers from their customers without any commission or any other incentives. There is no evidence to show that appellants retained any money so collected - When there is no inflow for the appellants, there may not be any allegation of such activity to come within the ambit of the definition of Business Auxiliary Services under section 65(19) of the Act ibid . The impugned order to the contrary cannot sustain - Appeal allowed - decided in favor of appellant.

Issues:
1. Liability of service tax under Business Auxiliary Service for collecting amounts from customers on behalf of the manufacturer.
2. Interpretation of the definition of Business Auxiliary Service under section 65(19) of the Finance Act, 1994.
3. Imposition of penalties under various provisions of law.

Analysis:

Issue 1: Liability of service tax under Business Auxiliary Service
The appellants, who were Authorized Dealers for a manufacturer, were alleged to have collected amounts from customers under a new scheme on behalf of the manufacturer. The show-cause notice proposed recovery of the amount with interest under Business Auxiliary Service. The original authority confirmed the demand and imposed penalties. The Commissioner (Appeals) upheld the order. The appellants contended that they were only acting as agents, collecting amounts without any commission or incentives, and passing them on to the manufacturer. The Tribunal observed that the appellants did not retain any money collected and did not receive any consideration for the activity. As there was no inflow for the appellants, the activity did not fall within the definition of Business Auxiliary Service under section 65(19) of the Act. The Tribunal set aside the impugned order, allowing the appeal.

Issue 2: Interpretation of the definition of Business Auxiliary Service
The definition of Business Auxiliary Service under section 65(19) of the Finance Act, 1994 was crucial in determining the liability of the appellants. The Tribunal noted that for an activity to be classified as Business Auxiliary Service, there should be evidence of consideration received by the appellants for the service provided. In this case, since the appellants did not receive any consideration and did not retain any collected amounts, the Tribunal concluded that the activity did not meet the criteria for Business Auxiliary Service. This interpretation of the definition played a significant role in setting aside the demand and penalties imposed on the appellants.

Issue 3: Imposition of penalties
Apart from the demand for service tax, penalties were also proposed under various provisions of law. The original authority and the Commissioner (Appeals) upheld the imposition of penalties. However, once the Tribunal set aside the demand itself by ruling that the activity did not constitute Business Auxiliary Service, the basis for imposing penalties was no longer valid. Consequently, the Tribunal allowed the appeal with consequential reliefs, if any, as per law, indicating that the penalties imposed were also set aside along with the demand.

This detailed analysis of the judgment highlights the key issues of liability under Business Auxiliary Service, interpretation of the relevant legal provisions, and the consequential impact on the imposition of penalties.

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