2015 (1) TMI 1140 - AT - Service Tax

Authorised service station service - Free services during warranty period - reimbursement or not of amount by the Car Manufacturer i.e. M/s. Maruti Udyog Ltd. - Held that - Liability to service tax is on account of the said service provided to a customer. The service is provided to the car buyers who are the customers. For the free services, no amount is charged from the customers. As regards the contention that amount towards the free services is reimbursed by Maruti Udyog Ltd., it is seen that Maruti Udyog Ltd. have categorically stated that they do not reimburse any amount towards such free services to the dealers. The respondents have also stated that providing such free services is part of the functions and duties of dealers who are entitled to the dealership commission. Also the free services are rendered to the car buyers and not to M/s. MUL and the car buyers pay nothing therefor. Seen in this light it is evident that the demand of service tax as per column 5 of the table above is misconceived. Coming to the demand of service tax on the amount received on account of salary of drivers of vans used for providing mobile service to the car owners shown in column 4 of the table, it is evident that the customer in this case is the car owner who is the recipient of service. M/s. MUL receive no service nor are M/s. MUL, the respondents customers. Thus the respondents have not provided the service of authorised service station to them (i.e. M/s. MUL). Accordingly this amount cannot be made liable to service tax under the category of authorised service station service - Decided against Revenue.

Summary

Issues:
- Appeal against Order-in-Appeal No. IND-1/152/2009 confirming demands and penalties under Sections 76, 77 & 78 of Finance Act, 1994.
- Dispute over service tax on salary of drivers and amount received for free services provided to car buyers.

Analysis:
1. The appeal was filed against the Order-in-Appeal confirming demands and penalties related to service tax on various transactions. The appeal specifically focused on demands confirmed in columns 4 & 5 of the table, concerning salary reimbursement for drivers and alleged amount received for free services.

2. The demand in column 4 pertained to the reimbursement of drivers' salaries for mobile services to car buyers, reimbursed by another entity. The demand in column 5 was regarding the alleged amount received for free services provided to car purchasers. The Revenue argued that service tax was applicable to these amounts, contrary to the Commissioner (Appeals) dropping these components.

3. The respondents contended that no reimbursements were made for free services provided to car buyers as it was their duty as dealers. They also argued that no service was provided to the entity reimbursing the drivers' salaries. They denied any wilful misstatement or suppression of facts.

4. The definition of an authorized service station and related taxable services were considered. It was noted that service tax liability arises from services provided to customers. Free services were rendered to car buyers without any charges. Maruti Udyog Ltd. confirmed not reimbursing amounts for free services. The demand for service tax on these free services was deemed misconceived.

5. Regarding the demand for service tax on drivers' salaries, it was clarified that the customers were the car owners receiving the service, not the entity reimbursing the salaries. As M/s. MUL did not receive any service, they were not the customers of the respondents. Therefore, this amount could not be subject to service tax under the authorized service station category.

6. The Tribunal found the Revenue's appeal unsustainable in light of the above analysis and dismissed it accordingly.