2023 (12) TMI 1069 - AT - Service Tax

Recovery of service tax alongwith interest and penalty - Business auxiliary services - spares and parts - incentive received from the Atlantic Lubricants and Specialities Pvt. Ltd. for buying minimum quantity of goods - amount received on account of colour difference charges of vehicles - rent received for providing table space to banking and financial institutions - HELD THAT - It is found that neither in the show cause notices, nor in the impugned order, the Ld. Commissioner has mentioned any specific clause of Section 65 (19) of Business Auxiliary Service (BAS) under which service tax demand is sought to be made - it is also found that the Tribunal has consistently taken the view that specific clause of Business Auxiliary Service is required to be mentioned and if not mentioned, the entire demand is liable to be set-aside. Reference made to the decision of the Tribunal in the case of SYNIVERSE MOBILE SOLUTIONS PVT LTD., (EARLIER TRANSCIBERNET INDIA PVT LTD.) VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, HYDERABAD IV 2023 (6) TMI 463 - CESTAT HYDERABAD where it was held that On this issue it is seen that Tribunals have been consistently holding that it is essential for the Show Cause Notice issuing authority to clearly indicate the sub-clause under which the service tax in question would fall. Demand of Service Tax on spares and parts - HELD THAT - It is found from the documents placed on record at Page No. 116 to 124 of the Appeal Paper book that services and spares are charged separately from the manufacturer for the warranty period and service tax was paid on the value of services and on the value of spare parts, VAT/Sale Tax was paid as the sale of spare parts is considered to be sale of goods and liable to VAT. Therefore, the service tax is not leviable on the sale of spare parts - reference made to Department Circular No. 699/15/2003-CX dated 05.03.2003 which specifically clarifies that the sale of parts, accessories and consumables are not includible in the value of taxable services provided the value of such consumables are shown separately and in the present case, we find that the assessee has shown the value of service and value of spare parts separately. Service tax on amount of incentive received from the Atlantic Lubricants and Specialities Pvt. Ltd. for buying minimum quantity of goods - HELD THAT - It is found that such receipt of incentives/trade discount is not towards provision of any service which fact is clear from the perusal of the agreement dated 01.10.2009 entered into between the parties which is placed at Page No. 195 to 200 of the Appeal Paper Book - it has been held in many case by the Tribunal has held that the demand of service tax is not sustainable on incentives and trade discounts received on the buying minimum quantity of goods. Demand of service tax under Business Auxiliary Service on the amount received on account of colour difference charges of vehicles - HELD THAT - Such charges are in relation to sale of car and is related to the value of car sold and not a consideration for any service, let along BAS. To this effect, the appellant has produced the certificate of the Chartered Accountant alongwith ledger which is on record of the appeal paper book - in the appellant s own case, for the previous period, the Ld. Commissioner (Appeals), Chandigarh set-aside the demand on this issue on the ground that there is no provisions of service involved in this case. Demand of service tax on rent received for providing table space to banking and financial institutions - HELD THAT - It is found that the amount received by the appellant is for providing space and not for promoting the business of banks/financial institutions. The provisions of space cannot be considered as promotion of business of the person to whom the space has been provided as held in various decisions. The impugned order confirming the demand amounting to Rs. 18,11,691/- under Section 73 of the Finance Act, 1994 is not sustainable in law, and therefore, the same is set aside - once the demand is set aside, the question of interest and penalty does not arise - appeal of assessee allowed.

Issues Involved:
1. Demand of Service Tax on incentives/commissions.
2. Demand of Service Tax on spares and parts.
3. Demand of Service Tax on incentive/trade discount.
4. Demand of Service Tax on colour difference charges.
5. Demand of Service Tax on rent received for providing table space.
6. Invoking the extended period of limitation.
7. Dropping of penalties under Sections 76, 77, and 78.

Summary:

1. Demand of Service Tax on incentives/commissions:
The Tribunal noted that the show cause notices and the impugned order failed to specify any specific clause of Section 65(19) of Business Auxiliary Service (BAS) under which the service tax demand was made. The Tribunal referenced several decisions including Syniverse Mobile Solutions Pvt. Ltd. and United Telecom Ltd., emphasizing that the absence of a specific clause renders the demand unsustainable. Consequently, the demand of Rs. 18,11,691/- under Section 73 was set aside.

2. Demand of Service Tax on spares and parts:
The Tribunal found that the appellant charged separately for services and spares, paying service tax on services and VAT on spares. This separation aligns with Department Circular No. 699/15/2003-CX, which clarifies that the sale of parts, accessories, and consumables is not includible in the value of taxable services if shown separately. The demand for service tax on spares and parts was thus deemed untenable, as supported by the decision in ABT Ltd.

3. Demand of Service Tax on incentive/trade discount:
The Tribunal observed that incentives received from Atlantic Lubricants and Specialities Pvt. Ltd. were not for any service provision but were trade discounts for buying a minimum quantity of goods. This was confirmed by the agreement and an undertaking from Atlantic. The Tribunal cited the case of D.D. Motors, concluding that such incentives are not taxable under BAS.

4. Demand of Service Tax on colour difference charges:
The Tribunal held that colour difference charges related to the sale of cars and not to any service provision. This was supported by a Chartered Accountant's certificate and previous orders in the appellant's own case. Thus, the demand for service tax on these charges was set aside.

5. Demand of Service Tax on rent received for providing table space:
The Tribunal found that the rent received for providing table space to banks and financial institutions was not for promoting their business but for providing space. This aligns with the decision in Coronation Motors, where mere provision of space was not considered BAS. Therefore, the demand for service tax on this rent was set aside.

6. Invoking the extended period of limitation:
The Tribunal noted that the extended period of limitation was invoked without evidence of willful suppression of facts by the appellant. The demand was based on audit objections, and the appellant was regularly audited by the department. Hence, invoking the extended period was not justified.

7. Dropping of penalties under Sections 76, 77, and 78:
The Department's appeal against dropping penalties was dismissed. The Tribunal upheld the Ld. Commissioner's decision to drop penalties under Section 80, considering the appellant's bona fide belief and complexities of transactions. The penalties were deemed unjustified as the primary demand itself was set aside.

Conclusion:
The Tribunal set aside the demand of Rs. 18,11,691/- under Section 73 of the Finance Act, 1994, along with interest and penalties. The assessee's appeal was allowed, and the Department's appeal was dismissed. The cross-objection filed by the assessee was also disposed of.

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