2024 (4) TMI 432 - AT - Service Tax

Levy of Service tax - Business Auxiliary Service - incentives being received by the appellant amounts to receipt of payment for providing the taxable service in relation to promotion or marketing or sale of goods produced or provided by MUL - Charges received by the appellant for extended warranty - Extended period of Limitation - penalty - HELD THAT - The appellant in no way is promoting or marketing the services provided by the client i.e. MUL. It is also found that the appellant has received the commission from MUL and not from the bank as alleged by the Department. It is also found that MUL vide its mail dated 17.05.2004 has already clarified that the dealers are not required to pay service tax on the commission received by them from MUL because MUL has deposited the applicable service tax - the demand of service tax under the category of Business Auxiliary Service is not sustainable in law and therefore the same is set aside. Charges received by the appellant for extended warranty - HELD THAT - It is a settled law that the service tax is not liable to be paid under Business Auxiliary Service for warranty commission. Extended period of Limitation - HELD THAT - No case has been made by the Department to show any positive act with intent to evade payment of duty. It has been held in the case of Sunshine Steel Industries 2023 (1) TMI 638 - CESTAT NEW DELHI which is upheld by the Hon ble Supreme Court in 2023 (7) TMI 479 - SC ORDER holding that the extended period cannot be invoked for a demand raised on the basis of audit. Therefore we find that extended period cannot be invoked and in the present case the substantial demand is beyond the period of limitation. Penalty - HELD THAT - The issue does not arise when the demand itself is not sustainable. The impugned orders are not sustainable in law and therefore set aside - appeal allowed.

Summary

Issues Involved: Applicability of service tax under 'Business Auxiliary Service', invocation of extended period of limitation, and imposition of penalty.

Summary:

1. Applicability of Service Tax under 'Business Auxiliary Service':
The appellant, a Maruti dealer, provided services such as assisting customers in arranging finance, making DGS&D sales, and offering extended warranties. The Revenue considered these activities as 'Business Auxiliary Service' u/s 65(19)(ii) of the Finance Act, 1994. The appellant argued that the services did not fall under this category and that commissions were received from MUL, which had already paid the applicable service tax. The Tribunal found that the appellant's activities did not promote or market services provided by MUL and that the appellant received commissions from MUL, not the bank. Therefore, the demand of service tax under 'Business Auxiliary Service' was not sustainable.

2. Invocation of Extended Period of Limitation:
The Department issued show cause notices invoking the extended period of limitation. The Tribunal noted that the appellant had regularly filed ST-3 Returns, was subject to audits, and the issue involved interpretation of statutory provisions. Citing precedents, the Tribunal held that the extended period could not be invoked as there was no positive act of suppression or intent to evade duty by the appellant. Consequently, the substantial demand was beyond the period of limitation.

3. Imposition of Penalty:
Given that the demand of service tax itself was not sustainable, the Tribunal found no justification for the imposition of penalties. The Tribunal set aside the penalties imposed u/s 76, 77, and 78 of the Finance Act, 1994.

Conclusion:
The Tribunal allowed all three appeals, setting aside the impugned orders and granting consequential relief to the appellant. The activities of the appellant were not classifiable under 'Business Auxiliary Service', the extended period of limitation was not applicable, and the imposition of penalties was unjustified.