2015 (11) TMI 229 - AT - Service Tax

Demand of service tax - Business Auxiliary Services - appellant received some amount from various financial institutions as commission for marketing of Auto Loan products and also an amount from manufacturers of car under the head Target Incentive Scheme - Imposition of penalty - Invocation of extended period of limitation - Held that - confirmation of tax liability under this head is upheld along with interest. Since the issue of whether such amount received by an assessee from financial institution for promoting the products like auto loan etc, would be taxable or not, has been settled by the Larger Bench 2014 (2) TMI 98 - CESTAT NEW DELHI (LB) , we find that the appellant could have entertained a bona fide impression that such amounts received as commission are not taxable. Accordingly, by invoking the provisions of Section 80 of the Finance Act, 1994, we set aside the penalties that are leviable on this count. Taxability of amount received and for achieving the target under Target Incentive Scheme - Held that - Appellant had been given targets for specific quantum of sale by the manufacturers of the cars. As per the agreement, on achievement of such target and in excess of it, appellant was to receive some amount as an incentive. Service Tax liability confirmed against the appellant on the amount received as incentive for achieving the targets under Business Auxiliary Services is unsustainable and liable to be set aside - Decided in favour of assessee.

Summary

Issues Involved:
Taxability of commission received for marketing Auto Loan products from financial institutions under Business Auxiliary Services; Taxability of amount received as target incentive under Business Auxiliary Services; Applicability of penalties imposed on the tax liabilities.

Analysis:
1. Taxability of commission received for marketing Auto Loan products: The appellant received commission from financial institutions for promoting products like Auto loans. The Tribunal found this issue to be settled against the appellant based on the judgment in the case of Pagariya Auto Centre. The Tribunal upheld the tax liability along with interest but set aside the penalties, considering that the appellant could have genuinely believed that such commissions were not taxable. Therefore, penalties on this count were waived under Section 80 of the Finance Act, 1994.

2. Taxability of amount received as target incentive: The appellant received incentives for achieving sales targets set by car manufacturers. The Revenue argued that these incentives should be taxed under Business Auxiliary Services. However, the Tribunal disagreed, stating that these incentives were in the form of trade discounts and not Business Auxiliary Services. The Tribunal relied on the judgment in the case of Sai Service Station to support this decision. Consequently, the tax liability on the amount received as incentives for achieving targets was deemed unsustainable, and thus set aside. As a result, interest liability and penalties on this account were also waived.

3. Penalties imposed on tax liabilities: The Tribunal upheld the tax liability with interest under Business Auxiliary Services for the commission received from financial institutions. However, the penalties on this amount were set aside due to the appellant's genuine belief that the commissions were not taxable. Similarly, the tax demand on the amount received as target incentives was set aside, leading to the waiver of interest liability and penalties on this account. Therefore, the appeal was disposed of by upholding the tax liability with interest on the commission received from financial institutions, while setting aside the tax demand on the amount received as target incentives. Interest liability on the upheld tax was maintained, but penalties were waived.