2012 (7) TMI 135 - AT - Service Tax

Extended period - authorised service station for Maruti - appellants had received incentive for vehicle loans given to the customers who purchased Maruti vehicles Appellants paid service tax even though it was their claim that Maruti Udyog Limited has paid the service tax on the full amount of incentive/ commission - Held that - Service tax cannot be collected twice on the same service and this is the basic principle of law and therefore, once a claim is made that service has already suffered tax, it should have been verified. Further, if the appellant was aware that service tax was being paid by Maruti Udyog Limited, invocation of extended period also may not be fair since there cannot be any suppression of facts or mis-declaration in such a situation. Regarding trading activity - amendment to Cenvat Credit Rules and various decisions on the issues have not been taken into account, nor the same have been brought up before the lower authorities Held that - matter is remanded to the original adjudicating authority

Issues:
1. Liability of service tax on incentive received from Maruti Udyog Limited.
2. Admissibility of cenvat credit on service tax paid for warranty services.
3. Demand for interest on service tax payment.
4. Time-barred demand.
5. Denial of cenvat credit due to trading activities.
6. Applicability of judicial precedents on cenvat credit for trading activities.
7. Verification of service tax payment claims.
8. Invocation of extended period for tax recovery.
9. Consideration of judicial precedents by lower authorities.

Liability of Service Tax on Incentive:
The appellant, an authorized service station for Maruti Udyog Limited, received incentives from banking and financial institutions for vehicle loans given to customers. It was found that service tax was not paid on this amount during a specific period. The appellant claimed that Maruti Udyog Limited had already paid the service tax on the full incentive amount and agreed to refund the service tax paid by the appellant. However, proceedings were initiated for interest and cenvat credit recovery, leading to the confirmation of the demand and imposition of a penalty.

Admissibility of Cenvat Credit:
The appellant had taken cenvat credit on service tax paid for warranty services provided by other authorized service stations. The credit was denied on the grounds that the appellant was engaged in trading activities and did not provide any output service. The appellant argued that trading activity was considered an exempted service post an amendment in the Cenvat Credit Rules in 2011. They also cited tribunal decisions supporting the admissibility of cenvat credit for trading activities, which were not presented before the lower authorities.

Demand for Interest and Time-Barred Claim:
The appellant contended that the service tax payment was made to avoid litigation, as Maruti Udyog Limited had already paid the tax. They argued that since the service tax was not liable, the demand for interest could not be sustained. Additionally, the appellant claimed that the demand was time-barred, referencing relevant tribunal and Supreme Court decisions on the limitation period for interest claims.

Verification of Service Tax Payment Claims:
The appellant asserted that the department should have conducted verification when they claimed that service tax had already been paid by Maruti Udyog Limited. They emphasized that service tax cannot be collected twice for the same service, and the principle of law required verification when a claim of prior tax payment was made. The appellant also raised concerns about the invocation of the extended period for tax recovery without proper verification.

Consideration of Judicial Precedents:
The appellate authority noted that several judicial precedents supporting the appellant's claims were not presented before the lower authorities. Due to the lack of consideration of relevant precedents and aspects like the amendment to Cenvat Credit Rules and tribunal decisions, the impugned order was set aside. The matter was remanded to the original adjudicating authority for fresh adjudication, granting the appellant a reasonable opportunity to present their case.

In conclusion, the appellate tribunal found merit in the appellant's arguments regarding the liability of service tax, admissibility of cenvat credit, demand for interest, time-barred claims, verification of tax payment claims, and the consideration of judicial precedents. The case was remanded for further adjudication, emphasizing the importance of verifying prior tax payments and considering all relevant legal precedents in tax recovery proceedings.

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