2021 (9) TMI 534 - AT - Service Tax

Levy of service tax - Business Auxiliary services or not - discount allowed by the supplier of goods for sale to corporate customers - commission from banks and financial companies and on payments received for insurance referral - penalty - extended period of limitation - HELD THAT - The dispute pertaining to discount offered to corporate customers has attained finality. In this connection, the decision of the Tribunal in TOYOTA LAKOZY AUTO PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX/CENTRAL EXCISE MUMBAI -II / MUMBAI - V 2016 (12) TMI 541 - CESTAT MUMBAI which has referred to the other two decisions, observing that discounts offered by car manufacturers to their dealers for onward transmission to corporate customers is not liable to tax as promotion or marketing or sale of goods produced or belonging to clients within the enumeration of business auxiliary service in section 65(19) of Finance Act, 1994. - the demand of ₹ 3,70,994/-, along with interest, and penalty under section 78 of Finance Act, 1994 fails to survive. Commission from banks and financial companies and on payments received for insurance referral - penalty - HELD THAT - Appellant has admitted and discharged liability arising on receipt of commission from financial institutions and insurance companies - reliance placed in the decision of the Tribunal in re Addis Marketing, the exposition of the Tribunal in GEMINI MOBILES PVT LTD, SUNNY MOTORS PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, LUCKNOW 2015 (8) TMI 1137 - CESTAT ALLAHABAD which examined several aspects for arriving at the conclusion of circumstances not being conducive to invoking of section 78 of Finance Act, 1994 is relevant. Penalty - Extended period of limitation - HELD THAT - In view of the circumstances and the stand taken by the Tribunal in these several decisions, invoking of the extended period for the purpose of imposition of penalty is not sustainable. Accordingly, the penalty imposed under section 78 of Finance Act, 1994 is also set aside. Appeal disposed off.

Summary

Issues:
- Upholding demand of ?29,57,199 for the period 2003-2006 on discounts, commissions, and payments received.
- Dispute limited to tax demand of ?3,70,994 on discounts and penalties imposed.

Analysis:
1. The appellant, an authorized dealer, offered discounts on sale of vehicles to corporate customers as per agreements with manufacturers. The demands were confirmed by the original authority under Finance Act, 1994, along with interest and penalties. The appellant contested the taxability of discounts under 'business auxiliary service,' citing relevant tribunal decisions.

2. The appellant argued that dues on commissions from banks and financial companies, and insurance referral, were paid, disputing only the penalties imposed. The appellant relied on a tribunal decision to support the plea for penalty quashing. The demands for subsequent periods were dropped at the adjudication stage.

3. The dispute regarding discounts offered to corporate customers was settled based on tribunal decisions. The matter was remanded to the original authority for re-evaluation of taxability of certain amounts and accounting entries. The demand of ?3,70,994, interest, and penalty under section 78 of Finance Act, 1994 did not stand.

4. The appellant admitted and paid liabilities on commissions from financial institutions and insurance companies. A tribunal decision clarified the classification of transactions between automobile dealers and financial institutions under 'business auxiliary service,' leading to the setting aside of penalties imposed.

5. Finality was given to tax liability by a circular of Central Board of Excise and Customs. The imposition of penalty under section 78 of Finance Act, 1994 was deemed unsustainable based on tribunal decisions and circumstances, leading to its setting aside.