2019 (2) TMI 26 - AT - Service Tax

Business Auxiliary Services - assessee had received amount towards dealer commission - whether the amount received attains the character of consideration and also whether the activity falls under BAS? - Held that - Though in the Show Cause Notice it is alleged that the activity would fall under Sub-Clause (i) of Section 65(19), the Original Authority has held that the appellant is acting as a Commission Agent. The definition of Commission Agent will show that Commission Agent is a person who acts on behalf of another and causes sale or purchase of goods - The appellant, in the present case, undisputedly, is not acting on behalf of the vehicle dealer for the purchase or sale of vehicles. Merely because vehicle is intended to be purchased from the dealer, the Bank would not disburse the loan. The Bank has to be satisfied with other conditions like executing hypothecation agreement, etc. The ultimate decision to give loan rests with the Bank. This being so, it is not a service provided to the dealer, and the Bank is never a Commission Agent of the dealer - It is clear that the assessee is neither acting on behalf of dealer nor providing any service to dealer. Therefore, the assessee definitely does not fit into the category of Commission Agent or under the definition of BAS. The discount received by the assessee cannot be considered as a consideration for service. The activity, if any, does not fall under the definition of BAS. Time limitation - Held that - Since the issue on merits is found to be in favour of the assessee, it is not necessary to consider the issue on limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Whether the amount received from dealers by the assessee/Bank is subject to service tax under Business Auxiliary Services (BAS).
2. Whether the assessee acted as a Commission Agent.
3. Whether the Show Cause Notice was valid in alleging suppression of facts and invoking the extended period for demand.

Issue-wise Detailed Analysis:

1. Levy of Service Tax under BAS:
The primary issue was whether the amount received from vehicle dealers by the assessee (a bank engaged in providing Banking and other Financial Services) is subject to service tax under the category of Business Auxiliary Services (BAS). The Department contended that the amount received was a commission for promoting the business of the dealer, thus falling under BAS. The assessee argued that the amount was merely a discount, not a commission, and that their primary activity was disbursing loans, not promoting the dealer's business. The Tribunal concluded that the amount retained by the assessee was a discount and not a consideration for services rendered. Therefore, the activity did not fall under the definition of BAS as per Section 65(19) of the Finance Act, 1994.

2. Assessee Acting as a Commission Agent:
The Department alleged that the assessee acted as a Commission Agent, which is included under BAS. The Tribunal examined the definition of a Commission Agent and found that the assessee was not acting on behalf of the vehicle dealer for the purchase or sale of vehicles. The bank's role was limited to disbursing loans based on its own criteria and not promoting the dealer's business. The Tribunal held that the assessee was neither acting on behalf of the dealer nor providing any service to the dealer, thus not fitting into the category of a Commission Agent or under the definition of BAS.

3. Validity of Show Cause Notice and Limitation:
The Department issued a Show Cause Notice alleging suppression of facts with the intention to evade payment of service tax, invoking the extended period for demand. The assessee argued that they had disclosed the discount received in their accounts and had a bona fide belief that it was not subject to service tax. Since the Tribunal found in favor of the assessee on the merits of the case, it did not find it necessary to address the issue of limitation.

Conclusion:
The Tribunal set aside the impugned orders, allowing the appeals filed by the assessee with consequential reliefs as per law and dismissed the appeal filed by the Department. The Tribunal concluded that the discount received by the assessee could not be considered as a consideration for service, and the activity did not fall under the definition of BAS.