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2018 (11) TMI 1392 - AT - Service TaxBusiness Auxiliary Services - providing financial assistance to customers and receiving commission in connection with the promotion or marketing of service provided to the client - Held that - M/s. Maruthi Udyog Ltd. are providing services of vehicle loans to the customers of the appellant which resulting in boosting the business of the company and recognition of the said assistance rendered by the appellant, the financial institution reciprocated with commission in some percentage of loan distributed through the appellant and this activity is a clear case of promotion of services rendered by the appellant which is specifically included in the category of BAS specified under Finance Act, 1994 and are liable to Service Tax w.e.f. 01.07.2003. Such promotion of business of financial help promoted the business of the appellant also and does not alter the character of BAS. This Tribunal in the case of City Honda 2017 (10) TMI 801 - CESTAT BANGALORE have already considered this issue in detail and has come to the conclusion that the appellants are providing the services of Business Auxiliary Service and therefore, liable to pay Service Tax. Further CBEC Circular No. 87/05//2006-ST dated 06.11.2006 clarified that Service Tax will be payable by the dealer on the gross amount received from the Financial Company. The liability of Service Tax against the appellants is sustained - penalty dropped by invoking section 80 - appeal allowed in part.
Issues:
1. Interpretation of the definition of "Business Auxiliary Service" under Service Tax laws. 2. Applicability of Service Tax on commission received for providing financial assistance. 3. Barred by limitation for demanding Service Tax prior to a specific date. 4. Consideration of conflicting views on the issue. 5. Imposition of penalties under Section 68 and 78 of the Finance Act. Analysis: Issue 1: Interpretation of "Business Auxiliary Service" The appellant contended that the impugned order did not properly appreciate the definition of "Business Auxiliary Service" and argued that merely providing space for financial assistance does not fall under this category. However, the Tribunal found that the appellant's activities of facilitating car loans and insurance for customers constituted promotion of services, making them liable for Service Tax under "BAS" specified in the Finance Act, 1994. Issue 2: Applicability of Service Tax on Commission The appellant received commission from financial institutions for facilitating loans to customers, which the appellant accounted for as commission. The Tribunal held that this commission received was taxable as it was part of promoting the services provided, as clarified in a CBEC Circular. The Tribunal cited precedents and upheld the demand for Service Tax on the commission received. Issue 3: Barred by Limitation The appellant argued that the demand for Service Tax prior to a specific date was not sustainable in law due to conflicting views and the introduction of tax on commission received. However, the Tribunal found the demand valid, considering the promotion of business activities and the liability for Service Tax from a certain date. Issue 4: Consideration of Conflicting Views The Tribunal considered conflicting decisions on the issue but relied on precedents where similar cases were decided in favor of imposing Service Tax under "BAS." The Tribunal upheld the demand for Service Tax based on the promotion of services and the commission received. Issue 5: Imposition of Penalties The Tribunal dropped penalties imposed under Sections 68 and 78 of the Finance Act, citing contradictory decisions during the relevant time. The penalties were dropped in line with previous Tribunal decisions where penalties were not levied due to conflicting views. In conclusion, the Tribunal upheld the demand for Service Tax on "Business Auxiliary Services" provided by the appellant but dropped the penalties imposed. The appeal was partly allowed based on the detailed analysis of the issues presented and the relevant legal precedents considered.
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