2024 (8) TMI 18 - AT - Service Tax

Non-payment of appropriate service tax - amount received as 'commission' on vehicle sale, sales promotion and incentive under the category of 'Business Auxiliary Services' - SCN do not specify the sub-section of Section 65(19) - non-payment of service tax on the amount of reimbursements received by them towards free service and warranty, under the category of 'Authorized Service Station Service' - extended period of limitation. Demand confirmed under the category of 'Business Auxiliary Service' - HELD THAT - It is observed that neither the Show Cause Notice nor the Order-in-Original has mentioned the specified sub-section of section 65(19) under which the service tax has been demanded. It is a settled position of law that when the Show Cause Notice does not specify under which clause of the definition of business auxiliary service the activity of the service provider falls, then demand is not sustainable. This view has been held by the Tribunal Hyderabad 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 , wherein it has been observed The impugned order, therefore, can be set aside only on this ground as the show cause notice does not mention which service out of the seven services specified in Section 65(19) of the Act was undertaken by the Appellant - by relying on the decision cited, it is held that in the absence of a specific sub-section of Section 65(19) of the Finance Act, 1994 under which the service tax has been demanded, the demand of service tax under the category of 'Business Auxiliary Service' is not sustainable and accordingly, the same is set aside. Demand of service tax confirmed under the category of 'Authorized Service Station' - HELD THAT - Since TML covers the expenses for after-sale services, which are already included in the assessable value for excise duty, no service tax is payable on the reimbursements received by the Appellant from TML. With regard to the reimbursement of labour, we agree with the submission of the that the same has become taxable only with effect from 01.07.2012. The appellant submitted that with effect from 01.07.2012, service tax has been discharged by them on the reimbursement of labour. The issue is no longer res integra since the Hon ble Supreme Court has already decided this issue by stating that that until May 14, 2015, reimbursable expenditure or cost in consideration for services were not included prior to the amendment of Section 67 of the Finance Act, 2015. Therefore, in the absence of such charging section, no service tax can be charged on the reimbursements received by the appellant - Hon ble Supreme Court in UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. 2018 (3) TMI 357 - SUPREME COURT where it was held that ' value of free supplies of diesel and explosives would not warrant inclusion while arriving at the gross amount charged on its service tax is to be paid.' - the demand confirmed under the head of Authorised Service Station Service is not sustainable and is set aside. Confirmation of the demand by invoking extended period of limitation - HELD THAT - It is observed that the performance of after sale services by the dealer is a standard practice. The Appellant has not undertaken any surreptitious mode of operations to receive the commission or reimbursements. Thus, there is no suppression of facts with intention to evade the tax established in this case. Accordingly, the extended period of limitation cannot be invoked in this case. For the same reason, no penalty is imposable on the Appellant. The impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Demand of service tax under 'Business Auxiliary Service' without specifying the sub-section of Section 65(19).
2. Demand of service tax under 'Authorized Service Station Service' on reimbursements for spares and labor costs.
3. Invocation of extended period of limitation for demanding service tax.

Issue-wise Detailed Analysis:

1. Demand of Service Tax under 'Business Auxiliary Service':

The appellant contended that neither the Show Cause Notice nor the Order-in-Original mentioned the specific sub-section of Section 65(19) under which the service tax was demanded. The Tribunal observed that it is a settled position of law that when the Show Cause Notice does not specify the clause under which the activity falls, the demand is not sustainable. This view was supported by several decisions, including Syniverse Mobile Solutions Pvt Ltd vs. Commissioner of Cus, CE & S.T, Hyderabad - IV, where it was held that the Show Cause Notice must clearly indicate the sub-clause under which the service tax is demanded.

The Tribunal concluded that in the absence of a specific sub-section of Section 65(19) of the Finance Act, 1994, the demand of service tax under 'Business Auxiliary Service' is not sustainable and set aside the same.

2. Demand of Service Tax under 'Authorized Service Station Service':

The appellant argued that the reimbursements received from TML for actual spares and labor costs should not be subject to service tax as these are expenses borne by TML and included in the assessable value of their vehicles subject to excise duty. The Tribunal agreed that imposing service tax on these amounts would result in double taxation. It was noted that the reimbursement of labor costs became taxable only from 01.07.2012, and the appellant had discharged the applicable service tax from that date.

The Tribunal further observed that the issue was already settled by the Hon'ble Supreme Court in Union of India v. Intercontinental Consultants & Technocrats Pvt. Ltd., which held that reimbursable expenditure or cost in consideration for services were not included prior to the amendment of Section 67 of the Finance Act, 2015. Consequently, no service tax could be charged on the reimbursements received by the appellant.

Additionally, the Tribunal noted that the Show Cause Notice did not mention any clause or provision for proposing the demand under 'Authorized Service Centre' Services, rendering the demand unsustainable. This view was supported by the decision in NPS Construction v. Commissioner of CGST & Central Excise, Pondicherry.

Based on these observations, the Tribunal set aside the demand under 'Authorized Service Station Service.'

3. Invocation of Extended Period of Limitation:

The appellant contended that the performance of after-sale services by the dealer is a standard industry practice known to the Department. Therefore, the allegation of suppression of facts to invoke the extended period of limitation was unsustainable. The Tribunal agreed, noting that there was no surreptitious mode of operations by the appellant and no suppression of facts with the intention to evade tax was established.

Consequently, the Tribunal held that the extended period of limitation could not be invoked, and no penalty was imposable on the appellant.

Conclusion:

The Tribunal set aside the impugned order and allowed the appeal filed by the appellant, concluding that the demands under both 'Business Auxiliary Service' and 'Authorized Service Station Service' were unsustainable and the invocation of the extended period of limitation was unjustified.