2023 (11) TMI 684 - AT - Service Tax

Levy of service tax - business auxiliary services or not - difference between the purchase price and sale price that is reimbursed to the distributors by M/s Tata Tele-Services Ltd. in the guise of subsidy - HELD THAT - Reliance placed upon the decision of this Tribunal in BALAJI ENTERPRISES VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, JAIPUR-I 2020 (3) TMI 17 - CESTAT NEW DELHI where it was held that The subsidy, on the other hand, is paid to the Appellant by Tata Tele Services to compensate for the loss incurred by the Appellant on the sale of mobile handsets at a lower price and cannot be said to have any relation to the service of promotion or marketing. Thus, in the absence of any services provided by the Appellant to Tata Tele Services, service tax could not have been levied on the amount of subsidy received by the Appellant. Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment include challenging the order passed by the Commissioner (Appeals) related to two appeals filed by the appellant, the interpretation of 'business auxiliary services' under section 65(105)(zzb) of the Finance Act, 1994, and the applicability of service tax on the subsidy received by the appellant from Tata Tele Services.

Challenging the Commissioner (Appeals) Order:
The appellant challenged the order dated 18.01.2018 passed by the Commissioner (Appeals) regarding two appeals filed by them. The appellant's counsel argued that a previous Tribunal decision favored the appellant, setting a precedent for allowing the current appeal.

Interpretation of 'Business Auxiliary Services':
The appellant was engaged in two businesses: marketing service products of Tata Tele Services and selling mobile handsets. The appellant claimed that the subsidy received from Tata Tele Services was not for marketing services but to compensate for losses incurred on handset sales. The dispute arose when a show cause notice alleged that the subsidy should be subjected to service tax as it related to 'business auxiliary services' under the Finance Act.

Applicability of Service Tax on Subsidy:
The Assistant Commissioner confirmed the demand for service tax on the subsidy received by the appellant. However, the appellant contended that the subsidy was not for marketing services but to cover losses on handset sales. The appellant relied on previous Tribunal decisions to support their argument. Eventually, the Tribunal set aside the order passed by the Commissioner (Appeals), except for the penalties, and allowed the appeal based on the precedent set by previous decisions.