2018 (8) TMI 817 - AT - Service Tax

Business Auxiliary Service - sale of loan product of ICICI Bank in lieu of Commission - service to HDFC Chubb an insurance company for sale of General Insurance Policy to the buyers of the cars in lieu of Referral Fees - Demand of Service Tax on commission received from the Bank and referral fees received from HDFC Chubb. Commission received from the bank against sale of loan product - Extended period of Limitation - Held that - The issue was not free from doubt, therefore the extended period could not have been invoked - the demand of service tax on commission in respect of commission received from ICICI bank is set aside on the ground of time bar. Referral fees received by the appellant from HDFC Chubb insurance company - Held that - The service is in connection with business of insurance of HDFC Chubb - In terms of Sub Section 65 of Finance Act, 1994, the service provided by the appellant falls under definition of Insurance Auxiliary Services whereas the Revenue has raised the demand under wrong head. On this ground the demand of service tax under Business Auxiliary Services does not sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Taxability of commission received from ICICI Bank.
2. Taxability of referral fees received from HDFC Chubb.
3. Invocation of extended period for tax demand.

Analysis:
1. The appellant, an authorized dealer of Hyundai Car, received commission from ICICI Bank for providing business auxiliary services related to the sale of loan products. The department demanded service tax on this commission. The appellant argued that service tax is payable only on the actual receipt amount as per Rule 6 of Service Tax Rules, 1994. The appellant also contended that conflicting judgments existed on the taxability of such commissions, leading to a reference to a Larger Bench. The Tribunal, considering the ambiguity and conflicting views, held that the demand for service tax on the commission from ICICI Bank was time-barred and set it aside.

2. The appellant received referral fees from HDFC Chubb for providing services related to the sale of General Insurance Policies. The department demanded service tax on these referral fees under Business Auxiliary Services. The appellant argued that the service provided falls under Insurance Auxiliary Services and not Business Auxiliary Services. The Tribunal agreed with the appellant, stating that the service provided by the appellant was in connection with the business of insurance of HDFC Chubb, falling under Insurance Auxiliary Services as per the Finance Act, 1994. Therefore, the demand for service tax under Business Auxiliary Services was not sustainable, and the impugned order was set aside.

3. The issue of invoking the extended period for tax demand was also addressed by the Tribunal. While the taxability of the commission from ICICI Bank was settled by a Larger Bench judgment, the Tribunal noted that there were conflicting views on the matter before the final decision. Considering the ambiguity and lack of malafide intention on the part of the appellant, the Tribunal held that the extended period could not have been invoked in this case. As a result, the demand for service tax on the commission received from ICICI Bank was set aside on the grounds of being time-barred. The appeal was allowed in favor of the appellant.