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TMI Blog2015 (8) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... of cars and receive commission/incentives to the extent of 5% of the loan amount from the banks/financial institutions. In all, they received commission/charges for various activities as under: i) commission received from banks/financial institutions for promotion/marketing of auto loans given by banks to car purchasers. ii) commission income under the heading incentives received from M/s. HMIL on account of sale of vehicles, vehicle parts produced by or belonging M/s HMIL iii) reference insurance commission received from New India Assurance Co Ltd for promotion/marketing of services provided by the insurance company. iv) pre delivery inspection charges received from M/s. HMIL on account of sale of new vehicles, which according to the Department, are leviable to service tax under the category of 'Business Auxiliary Service' (BAS). The appellant were alleged to have wrongly availed exemption notification 13/2003 dated 20 June, 2003 (for commission agents). 2.1 The appellant are in appeal against the demand of service tax confirmed against S. Nos. (i), (iii) and (iv) in para 2 above. Revenue is appeal against the setting aside of demand in respect of (ii) above. 2.2 Ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e department's order in original dated 22.06.2009 in the case of M/s SAI Service Station Pune. 4.2 On the third issue of referral commission received from New India Assurance Co Ltd., the contention is that they merely referred the prospective customers, that is the owners of the cars, to the insurance company for renewal of insurance after due follow-up at their workshop. Further that they only acted as a commission agent and therefore, at best, their liability would be from 16 June 2005, when an explanation for the term commission agent was provided in the definition of BAS. 4.3 As regards the pre delivery inspection charges received from HMIL, the allegation is that such services are covered under sub clause (iii) of section 65 (19) of BAS under the subhead customer care service provided on behalf of the client. The contention of the appellant is that no charge is recovered from the customers for the free services. The Commissioner partly allowed their claim and confirmed the demand only to the extent of amount of service charges received by way of 'interdealer claim income' towards the pre delivery inspection (PDI) and free services provided by the appellants. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the concerned official of HDFC bank whose statement was recorded was not granted. The learned counsel submitted that although the respondents were directed to produce records pertaining to HDFC showing the gross commission given to the appellant and its treatment in the banks account, the respondent has not been able to produce any further record in spite of opportunity given by this Bench. 5. Ld. A.R. appearing for Revenue states that the Vice President of the appellant confirmed in his statement that they received commission on the loan amount from the banks. The service rendered by them to the financial institutions falls under the category of Business Auxiliary Service as held by the Tribunal in the following judgments: (i) M/s. Roshan Motors vs. Commissioner 2009 (13) STR 667 (Tri del) (ii) Bridgestone Financial Services 2007 (8) STR 505 (Tri-Bang) (iii) Chambal Motors Pvt. Ltd. 2008 (9) STR 275 (Tri-Del) (iv) Sai Service Station Ltd. Appeal No.ST/34 & 37/10-mum He submits that although the appellant paid service tax on the commission after subvention, the subvention amount is a part of the commission due to the DSA, but which has been passed on to the customer by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;. Therefore, this income falls under BAS and is not trading alone. In support he referred to the Letter of Intent dated 9.9.1999 between HMIL and the appellant which requires the appellant to follow HMIL guidelines in displaying and publicizing material developed by HMIL. He relied on Tribunal judgment in the case of Automotive Manufacturers Pvt. Ltd. 2013 (32) STR 539 (Tri-Mum). 6. We have carefully gone through the facts of the case and submissions made by both sides. 6.1 It is an undisputed fact that the appellant were paying service tax on the commission received from other DSAs such as Kotak Mahindra Pvt. Ltd. and ICICI Bank. That they were marketing the financial products of the financial institutions is clear from one such agreement executed by them shown to us which contains clauses as below: ".......... KMPL hereby appoints the Direct Marketing Associate as its marketing associate to market the various financial products and schemes of KMPL relating to vehicle finance........... ..............However it is expressly understood that the Direct Marketing Associate shall perform the function of marketing of financial products and schemes introduced by KMPL relating to ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogistics, customer relationship management services, accounting and processing of transactions operational assistance for marketing, formulation of customer care service and pricing policies infrastructural support service and other transactional proceeds." The contention of Ld. Counsel is that the service would fall under Clause (vi) namely "provision of service on behalf of the client" which was introduced in the definition of BAS only on 10.9.2004. We find from the above definitions that the service provided by the appellant is directly an activity of marketing of auto loans provided by the banks and they do not provide a service on behalf of the banks. The appellant bring in customers for the banks and the banks provide the financial service to the customers. Undoubtedly, this activity falls under BAS clause (ii) i.e. promotion or marketing of service provided by the client. The matter stands decided in the cases of Roshan Motors (supra) and Bridgestone Financial Services (Supra). And quite apparently neither does the activity fall under the coverage of Business Support Service. Therefore, the contention of the appellant is not accepted. On the basis of nature of activities u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the dealer would be the gross amount paid by the bank. Reliance is placed on the case of Chambal Motors (supra) which held that, "From the nature of agreements on record including the franchisee agreement in the third appeal, it is clear that the assessees were, under an agreement with the bank had undertaken to provide service in relation to promotion or marketing of the 'Banking and Financial Services' provided by the banks. The banks were providing services under the category 'Banking and Other financial services' falling in clause (12) of Section 65. In relation to those services, the respondent- assessees were providing services for promotion or marketing of the banking and other financial services provided by the banks. The banks were, therefore, their clients being recipient of such services from the respondents. It has come in evidence that the respondents were required to obtain loan applications from their customers who desired to avail loans from the banks. The respondents had undertaken to process those applications and after scrutiny forward them to the bank. Admittedly, for such services, they were paid commission by the bank, which was reflected in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncentives/discounts are received by the appellant under various schemes of the manufacturer cannot lead to the conclusion that the incentive is received for promotion and marketing of goods. It is not material under what head the incentives are shown in the Ledgers, what is relevant is the nature of the transaction which is of sale. All manufacturers provide discount schemes to dealers. Such transactions cannot fall under the service category of Business Auxiliary Service when it is a normal market practice to offer discounts/institutions to the dealers. The issue is settled in the case of Sai Service Station (supra). Therefore, we reject the appeal of the department. 6.6 As regards the issue of tax on pre delivery inspections we find that there is no difference whether the services are provided by one dealer or another and therefore service tax cannot be levied in respect of inter dealer claims. 6.7 In view of the above discussion, appeal of M/s. Jaybharat Automobiles Ltd. regarding duty demands except for demand of tax on inter dealer claim, is rejected. Interest under Section 75 and penalties under Sections 76 and 78 are ordered to be paid appropriately in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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