2015 (10) TMI 59 - AT - Service Tax

Waiver of pre deposit - Valuation - payment of service tax on Net basis - Business Auxiliary Service - Held that - Service tax was required to be paid by the appellant on the entire amount of commission received by the appellant under BAS. However, appellant paid service tax on the net commission retained by it as there was some confusion in this regard at that time. - there were indeed doubts (about whether service tax was to be paid on the entire commission received or on the net commission retained by DSA/DMA) of such a degree that CBEC thought it fit to clarify the matter.Therefore, prima facie extended period may not be invocable.In this case, the Show Cause Notice was issued on 31.07.2007 and the period of demand is as stated earlier July, 2003 to December, 2004. In these circumstances, appellant has an arguable case with regard to the demand being time barred. - Stay granted.

Issues:
1. Service tax demand confirmation for Business Auxiliary Service (BAS) provided to banks and Non Banking Financial Companies (NBFCs) by working as Direct Selling Agent (DSA) / Direct Marketing Agent (DMA) for financing cars.
2. Applicability of Service Tax Valuation Rules, 2012.
3. Confusion regarding payment of service tax on commission retained by the appellant.
4. Interpretation of CBEC circular No.87/5/2006-ST on service tax issues related to authorized motor vehicle dealers and service stations.

Analysis:
1. The appeal was filed against the Order-in-Appeal confirming a service tax demand for BAS provided to banks and NBFCs by working as DSA/DMA for car financing. The appellant argued that it had paid a significant amount towards the tax and interest, and there was confusion regarding the applicability of Service Tax Valuation Rules, 2012. The Revenue contended that service tax was required on the entire commission received by the appellant. The Tribunal agreed with Revenue but acknowledged the confusion during that time. The CBEC circular clarified that tax was payable on the gross commission received by the dealer, not on the net amount retained after passing on incentives to customers.

2. The confusion regarding the payment of service tax on the commission retained by the appellant was addressed by referring to the CBEC circular. The circular highlighted that doubts existed about whether tax should be paid on the entire commission or the net amount retained by DSA/DMA. The Tribunal noted that the circular indicated a level of uncertainty that justified the appellant's position. As the Show Cause Notice was issued in 2007 for the period of demand from July 2003 to December 2004, the Tribunal found that the demand might be time-barred, supporting the appellant's case.

3. Considering the arguments and the CBEC circular, the Tribunal found that the confusion during the relevant time period justified the appellant's position to some extent. More than 50% of the demand and some interest had already been paid by the appellant. Therefore, the Tribunal waived the requirement of further pre-deposit and allowed a stay on the recovery of the remaining liability during the appeal's pendency. The decision was based on the analysis of the contentions presented by both parties and the interpretation of the relevant legal provisions and circulars.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by the parties, and the Tribunal's decision based on the legal principles and interpretations of the relevant circulars and rules.

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