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2020 (4) TMI 76 - AT - Service TaxBusiness Auxiliary Services - demand for the period April 2009 to June 2012 confirmed for the reason MAN Germany was rendering BAS to the Appellant by providing after sale services to the customers of vehicles on behalf of the Appellant - HELD THAT - The role of the Appellant assigned under the Agreement was limited to sale of trucks including spare parts. Article 9.2 clearly provides that the Appellant shall not be responsible for rendering any after sale services and that MAN Germany shall arrange for such services as may be required by its marketing organizations or its designated buyers. Article 9.5 basically provides that as MAN Germany has to provide warranty and after sale service, the Appellant shall allow a discount of Euros 500 on the product sold by the Appellant to MAN Germany. This does not in any manner mean that MAN Germany was rendering after sale service on behalf of the Appellant. In fact, the agreement is to the contrary. It provides that the Appellant shall not be responsible for rendering any after sale service. In such a situation, it cannot be said, under any circumstances, that MAN Germany was providing after sale service on behalf of the Appellant. After sale service was agreed to be provided by MAN Germany on its own account. The discount that is being offered by the Appellant to MAN Germany is merely an adjustment in the price of goods sold and is not towards provision of any service to be undertaken by MAN Germany on behalf of the Appellant. The service provided by MAN Germany would, therefore, not classify as BAS. The confirmation of demand, therefore, for the period 1 April, 2009 to 30 June, 2012 cannot be sustained - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Demand of service tax for the period April 2009 to June 2012 under 'business auxiliary service' (BAS). 2. Demand of service tax for the period July 2012 to March 2014 under Section 66(E)(e) of the Finance Act for 'agreeing to refrain from providing warranty services'. 3. Invocation of the extended period of limitation. 4. Violation of principles of natural justice. Issue-wise Detailed Analysis: 1. Demand of Service Tax for the Period April 2009 to June 2012: The Principal Commissioner confirmed the demand for this period, stating that MAN Germany was rendering BAS to the Appellant by providing after-sale services on behalf of the Appellant. The Appellant contended that the provision of after-sale and warranty services by MAN Germany was in pursuance of its own obligations to its end customers and not on behalf of the Appellant. Article 9.2 of the Agreement specified that the Appellant would not be responsible for after-sale services, which would be arranged by MAN Germany. Article 9.5 allowed a discount of 500 Euros to MAN Germany for these services. The Tribunal found that the Agreement clearly indicated that MAN Germany was responsible for after-sale services on its own account, not on behalf of the Appellant. Thus, the discount was an adjustment in the price of goods sold, not towards the provision of any service by MAN Germany on behalf of the Appellant. Consequently, the service provided by MAN Germany did not classify as BAS, and the demand for this period could not be sustained. 2. Demand of Service Tax for the Period July 2012 to March 2014: The Principal Commissioner dropped the demand for this period, observing that the show cause notice alleged the Appellant received declared services from MAN Germany by agreeing to refrain from providing warranty services. However, the notice failed to establish that the Appellant received any consideration for refraining from providing warranty services. Moreover, the notice contradicted itself by stating that the Appellant received services from MAN Germany while also suggesting the Appellant provided services. In the absence of any consideration, no service tax could be levied. Thus, the demand for this period was not sustained. 3. Invocation of the Extended Period of Limitation: The Appellant argued that the extended period of limitation could not be invoked. However, since the demand itself was not sustainable, the Tribunal did not find it necessary to address this issue in detail. 4. Violation of Principles of Natural Justice: The Appellant claimed that the show cause notice did not specify the sub-clause of section 65(19) of the Finance Act under which the alleged BAS services were taxable. The Tribunal noted that the nature of the service received by the Appellant was clearly mentioned, and thus, the notice was referable to sub-clause (vi) of section 65(19). However, since the demand was not sustainable on other grounds, this issue was not elaborated upon. Conclusion: The Tribunal set aside the impugned order dated 22 February 2016 passed by the Principal Commissioner, thereby allowing the appeal. The confirmation of demand for the period April 2009 to June 2012 was not sustained, and the demand for the period July 2012 to March 2014 was already dropped by the Principal Commissioner. The Tribunal did not delve into the issues of the extended period of limitation or principles of natural justice as the primary demand itself was not maintainable.
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