2009 (4) TMI 130 - AT - Service Tax

BAS - Commission board circular no. 87/05/2006 dated 6.11.2006 Penalty Held that - it appears that there was doubt regarding levy of tax on commission by the authorized automobile dealers which working as directing marketing agent of ICICI Bank for providing services to various customers for purchasing vehicles on loan, was clarified by the Board s Circular dated 06.11.2006 - There is no mala fide on part of the appellants and, therefore, imposition of penalty under Section 78 of the Finance Act, 1994 is not warranted. It is noticed that service tax was introduced on the activities of the appellants in July, 2003 and the appellants paid the tax voluntarily in December, 2004 with interest penalty set aside by invoking section 80

Summary

Issues: Levy of tax on commission received by automobile dealers, imposition of penalty under Section 75A, 76, 77 & 78 of the Finance Act, 1994, non-disclosure of rendering taxable service, applicability of service tax law, voluntary payment of tax, invocation of Section 80 of the Act.

Analysis:

1. Levy of Tax on Commission:
The issue revolved around the doubt regarding the levy of tax on commission received by automobile dealers acting as "directing marketing agent" for financial institutions. The Board's Circular dated 06.11.2006 clarified this aspect. The appellants arranged loans on behalf of financial institutions and received commission. They voluntarily paid the tax in December 2004 for the period from July 2003 to December 2004. The Tribunal found no mala fide intention on the part of the appellants. Consequently, the imposition of penalty under Section 78 of the Finance Act, 1994 was deemed unwarranted.

2. Imposition of Penalty:
The appellant argued that the penalty imposed under Section 75A, 76, 77 & 78 of the Finance Act, 1994 was not sustainable as they had already deposited the tax amount before the adjudication order. The Tribunal considered the facts and circumstances, noting that the appellants paid the tax voluntarily in December 2004 with interest. Given that there was no dispute regarding the payment of tax and the new levy of service tax in July 2003, the Tribunal set aside the penalties imposed on the appellant.

3. Non-Disclosure and Applicability of Service Tax Law:
The Department reiterated that the tax was levied in July 2003, and the appellants had not obtained registration under the service tax law during the relevant period. It was contended that the fact of providing taxable services was not disclosed by the appellants. However, the Tribunal found that the appellants were engaged in providing services to customers obtaining loans for purchasing vehicles, and they had paid the tax voluntarily in December 2004. The Tribunal upheld the demand of duty but set aside the penalties, considering the voluntary payment and lack of mala fide intent.

4. Invocation of Section 80 of the Act:
The Tribunal invoked Section 80 of the Act, considering the appellants' partial payment of tax before the show cause notice and the balance amount before the adjudication order. The Tribunal concluded that it was a fit case for invoking Section 80, leading to the setting aside of the penalties while upholding the duty demand. The appeal was allowed with consequential relief, emphasizing the voluntary payment of tax and the absence of mala fide intentions on the part of the appellants.