2016 (12) TMI 1536 - AT - Service Tax

Pre-deposit - Business auxiliary service - commission agent service - The agreement entered into with M/s Hyundai Motors no doubt provides that the appellant has to actively and vigorously promote Hyundai products. They are also required to undertake servicing of Hyundai vehicles - is the service classified under business auxiliary services? - Held that - The important aspect of definition of commission agent is that there should be a relationship of agent and principal with the appellant acting as agent of M/s Hyundai Motors. A perusal of the agreement entered into by the appellant with M/s Hyundai Motors, reveals that it has been made on principal to principal basis - Prima facie, it appears that the levy of service tax does not appear to be sustainable especially in view of the fact that the relationship between the appellant and M/s Hyundai Motors are on principal to principal basis - the case merits waiver of pre-deposit in full - appeal allowed - waiver of pre-deposit granted till disposal of the appeal.

Summary

Issues:
Service tax demand confirmation against the appellant under business auxiliary services for various amounts received from M/s Hyundai Motors.

Analysis:
The appeal was filed against an order confirming a service tax demand of ?1,25,24,819 along with interest and penalty under Section 78 of the Finance Act, 1994. The demand was made on amounts received by the appellant, including incentives/commissions, lubricant sales commissions, and charges for extended warranty and handling while operating as an authorized service station for M/s Hyundai Motors. The Revenue contended that the appellant acted as a commission agent for M/s Hyundai Motors, justifying the service tax levy.

The appellant argued that the incentives received were trade discounts and not subject to service tax under business auxiliary services. They cited relevant case laws to support their position. The Revenue opposed the grant of stay and waiver, relying on a Larger Bench decision emphasizing the classification of taxable services based on transactional documents. They argued that the appellant's activities fell under the definition of a commission agent, making them liable for service tax.

Upon hearing both sides, the Tribunal examined the agreement between the appellant and M/s Hyundai Motors. It was noted that the agreement was on a principal-to-principal basis, indicating no agency relationship. The consideration received by the appellant was in the form of trade discounts on car prices, purchased and resold from M/s Hyundai Motors. The Tribunal found that the service tax levy was not sustainable, considering the principal-to-principal relationship and trade discount nature of the amounts received. Citing similar case law precedents, the Tribunal granted full waiver of pre-deposit, allowing the stay application until the appeal's disposal.

In conclusion, the Tribunal allowed the stay application and granted a waiver of pre-deposit until the appeal's final resolution. The decision was based on the absence of an agency relationship and the trade discount nature of the amounts received by the appellant from M/s Hyundai Motors.