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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 ..... mission paid by the bank for promotion of their financial products by the appellant to customers is subject to payment of Service Tax. Even if some part of the commission was given by the bank to the customers directly on behalf of the appellant, the fact remains that the bank has shown full amount of commission as paid to the appellant. Board Circular 87/05/2006-ST dt. 6.11.2006 supports this view while stating that if part of the dealer's commission is shared with the customers, that is an independent transaction between the dealer and the purchaser of the vehicle, and does not involve the service rendered by the dealer to the bank. Tax payable by the dealer would be the gross amount paid by the bank. - 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 applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d appropriately in accordance with the amount of demand confirmed by us. Penalty under Section 77 is upheld. - Decided partly in favour of Revenue. - Appeal No. ST/55/2010-Mum & ST/100/2010-Mum - Final Order Nos. A/1924-1925/2015-WZB/STB - Dated:- 6-7-2015 - Anil Choudhary, Member (J) And P S Pruthi, Member (T),JJ. For the Appellant : Shri R G Sheth, Adv. For the Respondent : Shri M S Reddy, Deputy Commissioner (AR) ORDER Per: P S Pruthi: M/s. Jaybharat Automobiles Ltd. in Appeal No. ST/100/2010 and Revenue in Appeal NO. 55/2010 have filed appeals against the order No. 12/KLG TH-II/2009 dated 27.10.2009 passed by the Commissioner of Central Excise Thane. For convenience M/s Jaybharat Automobiles Ltd. are hereinafter referred as appellant. 2. The appellant are an authorized dealer and service station of M/s. Hyundai Motors India Ltd. (HMIL). They are engaged in the activity of selling cars, servicing, and selling spares for the vehicles. They are also appointed as direct sales agents (DSA) for banks/financial institutions under agreements to arrange loans from these institutions for the prospective buyers of cars and receive commission/incentives to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to service tax notwithstanding the fact that part of the amount was sub-vented. The appellant relied on the case of Jaika Motors Ltd. vs. Commr. ST/170/2007-Mum in which it was held that when mere space is provided to banks in the premises of the dealer, it cannot be said that BAS has been provided. This judgment also referred to the case of Pagariya Auto Centre Service Tax Appeal No. 103 of 2010. 4.1 On the second issue where Revenue is in appeal, the Commissioner decided in their favour holding that the transactions between HIMIL and the appellant are on a principal to principal basis. According to the Ld Counsel, on purchase of the parts, the ownership changes to the appellant and as dealers of those vehicles and spare parts, it was their own interest to promote sales of the same and such promotion cannot be regarded as service rendered to HMIL. He relied on the Tribunal's decision in the case of Pillay and Sons 2009 (14) S.T.R. 844 in which it was held that service tax cannot be levied on amounts which have been subjected to the levy of sales tax. He added that the incentives received by them on the sale are related to the sale only. He relied on the department's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalties imposed under Sections 76 and 78. He relied on the cases of City Motors (supra), South City Motors (supra), Brij Motors 2012 (25) STR 489 and Charak Pharma Pvt Ltd 2012(278) ELT 319. According to the appellant, the present case is fit for invoking the provisions of section 80 for waiving the penalty. The Ld. Counsel also argued that the larger Bench in the case of Pagariya Auto Centre (2014 (33) STR 506 (TLB) held that 'no uniform principal emerges as would guide determination of whether a particular transaction involving an interface between an automobile dealer and bank or financial institution would per se amount to BAS'. 4.5 The Ld counsel challenges the amount of commission on which service tax has been demanded. According to him the service tax payable on the commission received from HDFC bank is R.s 16,98,132/- and not ₹ 23,58,519/-. And service tax can be demanded only on the basis of entries in their books of account and not on the basis of details submitted by the HDFC. The amount given by HDFC bank without being corroborated is unsustainable in law as per section 34 of the Indian Evidence Act even their request for cross-examination of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n correctly as the subvention amount was not indicated in the S.T. 3 Returns. Only a comparison of S.T. 3 Returns and information from the Bank revealed that the said value declared in S.T. 3 Returns was substantially low. He also stated that the circulars issued by M/s. HMIL regarding 'inter dealer settlement rates' for pre-delivery inspection and free services contained information which was not declared to the department. For all these reasons, according to Ld. AR extended time period is applicable. He stated that the case of Pagariya Auto Centre vs. Commissioner of Central Excise, Aurangabad - Service Tax Appeal No. 103 of 2010 only decided that the identification of the transaction and its appropriate classification would depend on analysis of relevant Larger Bench. On the issue of penalty he relied on the case of BCCI reported in - Appeal Nos.ST/32 300/12-Mum later affirmed by the Mumbai Hon'ble High Court holding that penalties under Sections 76 78 are imposable simultaneously. 5.2 As regards the appeal of Revenue he stated that the incentive received under various heads were reflected in the Profit and Loss Account and not under 'purchase and sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the client; or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the client; or . Post 10.09.04 (19) business auxiliary service means any service in relation to, - (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or Explanation .- For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, inputs means all goods or services intended for use by the client; (v) production or processing of goods for, or on behalf of, the client; (vi) provision of service on behalf of the client; or .. Business Support Service Section 65(105) support service of business or commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, tele-marketing, processing of purchase orders and fulfillment of services, information and tracking of delivery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find no reason to discard the information given by the bank. If appellant wanted to dispute the same, the appellant were free to get a clarification from the bank during last 7 years from 2006 when the Bank gave the details to the Department. But the appellant chose not to do so. Once the department produces a letter from the bank the onus shifts to the appellant to dis-prove the same. Therefore, we hold that the amount of commission paid by the bank for promotion of their financial products by the appellant to customers is subject to payment of Service Tax. The amount of commission declared by the appellant in their Service Tax Returns was less than the amount of commission declared by HDFC to the department. Even if some part of the commission was given by the bank to the customers directly on behalf of the appellant, the fact remains that the bank has shown full amount of commission as paid to the appellant. Board Circular 87/05/2006-ST dt. 6.11.2006 supports this view while stating that if part of the dealer's commission is shared with the customers, that is an independent transaction between the dealer and the purchaser of the vehicle, and does not involve the service ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply. The reliance on various judgements by the Ld Counsel regarding extended time period does not help the appellant's case because, as we have mentioned above, the appellant was paying service tax for providing similar services to other banks. And the appellant were aware of their liability to pay tax as they had raised debit notes on HDFC bank in respect of service tax. There is clear suppression of facts and penalties are imposable both under Sections 76 and 78 as held in the case of BCCI (supra). 6.4 As regards the Referral Commission received by the appellant from the insurance company, we agree with the Ld. AR that the commission is not received as a commission agent because the promotion and marketing of the insurance service is also covered under Section 65 (19) (ii) of the Finance Act, 1994 which came into effect form 1.7.2003. The fact of receiving commission was not declared to the Department and this suppression of facts warrants invocation of extended time period for demanding the tax. 6.5 On the appeal by Revenue on the issue of incentives received by the appellant from the car dealer, we find that the relationship between the appellant and the dealer is on ..... 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