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2019 (1) TMI 1439 - AT - Service TaxClassification of services - Business Auxiliary Service or not - service in respect of sale of insurance products for and on behalf of M/s. Maruthi finance to the buyers of vehicles from M/s. Maruthi Udyog Ltd. - Held that - The issue is decided in the case of M/S. AVG MOTORS LIMITED, M/S. INDUS MOTOR COMPANY PVT. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX 2017 (10) TMI 502 - CESTAT BANGALORE , where it was held that The appellants are doing the service of promotion or marketing of service viz., issuance of insurance policies on behalf of MIBL. The fact that service tax was being paid by MUL to the insurance company along with the insurance premium will not make any difference, when the assessee-appellants are independently providing the service of promotion or marketing, which is covered by Business Auxiliary Service as defined in Section 65(19) of Finance Act, 1994 read with Section 65(105)(zzb) of Finance Act, 1994. Penalty - Held that - Further, the Tribunal has dropped the penalty on the ground that the subject matter involved relates to interpretation issue - following the same, the penalty is dropped. Appeal allowed in part.
Issues:
Appeal against rejection of appellant's appeal by Commissioner(Appeals) regarding liability to pay service tax under 'Business Auxiliary Service' (BAS) for sale of insurance products. Analysis: The appeal challenged an order confirming demand of service tax for the period 01/04/2005 to 31/09/2005 and 01/10/2005 to 31/03/2006, along with penalties, due to activities related to sale of insurance products. The appellant received remuneration from Maruthi Insurance Brokers Ltd. (MIBL) and Maruthi Udyog Ltd., leading to the issuance of show-cause notices. The appellant argued that the service tax had already been paid by MIBL/MUL, and thus, they should not be liable for double taxation. The appellant cited a previous decision in their favor, Popular Vehicles & Services Ltd. Vs. CCE, which was upheld by the Hon'ble High Court of Kerala. The appellant contended that the service provided by them did not fall under BAS, as they were not promoting services provided by MIBL. The learned AR defended the order, relying on various tribunal decisions that held similar services under BAS. The AR highlighted cases like City Honda vs. CCE, Competent Automobiles Co. Ltd. Vs. CST, CST, Mumbai Vs. Jaybharat Automobiles Ltd., and Pagariya Auto Center Vs. CCE, to support the contention that the services in question were covered under BAS. The AR also pointed out that the High Court of Kerala dismissed the appeal on jurisdictional grounds, not on the merits of the case. The AR emphasized that subsequent tribunal decisions upheld the liability of service tax for similar services. The Tribunal, in a similar case, AVG Motors Ltd., confirmed the demand of service tax but dropped the penalties, citing precedents like Ved Automotives vs. CCE, Kanpur, CST, Mumbai vs. Jaybharat Automobiles Ltd., and TVS Motor Co. Ltd. vs. CCE, Chennai. The Tribunal reiterated that the appellants were promoting or marketing services covered under BAS, as defined in the Finance Act, 1994. The Tribunal referred to Circular No.87/05/2006-ST, clarifying that service tax was payable on the gross amount received by the dealer from financial companies. Following the precedents and interpretations, the Tribunal upheld the demand of service tax but dropped the penalty, as the issue involved interpretation. The appeal was disposed of accordingly.
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