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TMI Blog2019 (6) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... established the network of Authorized Repairers for the benefit of the manufacturer, the Overseas Distributors have not directly carried out any service to the customer. When the Overseas Distributor is establishing the network of Authorized Repairers for carrying out the warranty responsibility of the appellant, indeed, this will satisfy customer care services provided on behalf of the client contained in Sub-Clause (iii) of the definition of Business Auxiliary Service , and would be taxable. Extended period of limitation - HELD THAT:- The period involved is from October 2008 to March 2015. The documents produced show that audits were conducted in 2008, 2009 and the subsequent years. The letter dated 15.09.2009 shows that Internal Audit was conducted from 17.08.2009 to 31.08.2009. The letter dated 06.06.2013 is an intimation of CERA Audit wherein the appellant is informed that Officers would be visiting their unit from 24.06.2013 to 28.06.2013. Even though such repeated audits had been conducted, the Show Cause Notice for the period from October 2008 to March 2013 was issued only on 28.03.2014 - In the present case, even if the Service Tax is paid as demanded by the Department, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, for the limited purpose of warranty services, it appeared to the Department that the appellants continued to have the relationship of a service provider to the buyer of the car. The Overseas Distributors are contractually bound to provide such services on behalf of the appellant in as much as that as per the agreement it is their responsibility to establish and monitor the network of Authorized Repairers. 2.2 It appeared to the Department that the services rendered by the Overseas Distributors are taxable services falling under the category of Business Auxiliary Services defined under Section 65 (19) of the Finance Act, 1994 read with Section 65 (105) (zzb) ibid for the period up to 30.06.2012. For the subsequent period, the activity appeared to be taxable in terms of Section 65B (44) of the Finance Act, 1994. Such service providers namely, the Overseas Distributors, are in a foreign country and the service recipient namely, M/s. Hyundai Motor India Pvt. Ltd. (appellant herein), is in India. The liability for payment of Service Tax was shifted to the appellant in terms of Section 66A of the Finance Act, 1994 read with Rule 2 (1) (d) (iv) of the Service Tax Rules, 1994. From the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of service provider to the customer i.e., the buyer of the car. That Overseas Distributor is bound to provide such repair and maintenance services to the ultimate buyer on behalf of the appellant. That the said activity would fall under Sub-Clause (vi) of the definition of 'Business Auxiliary Service'. Though in the Show Cause Notice the demand is based on the warranty repair and maintenance services rendered, in the Order-in-Original the adjudicating authority has wandered into the other Sub-Clauses of the definition of 'Business Auxiliary Service' to observe that the Overseas Distributors are also providing promotion of sales of cars and customer care services for the appellant. 3.3.3 He drew our attention to the Annexure to the Show Cause Notice to emphasize that the demand of Service Tax is raised only on the amount that has been paid by the appellant to the Overseas Distributor, being charges for the repair and maintenance of vehicles during the warranty period. There is no allegation that the appellant has paid any amount for the promotion of sales or activities relating to rendering of customer care services. Therefore, the observations made in the impugned order that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Service Station in relation to motor cars and two-wheeled motor would be covered under the ambit of Service Tax. The examples of services would include services provided under warranty period, subsequent services such as routine check of engine, vehicle, engine oil check, gas oil check, wheel alignment, etc., or any repair undertaken as such. All these services were brought under Authorized Service Station service by the Ministry vide Circular No. 87/05/2006-ST dated 06.11.2006 This Circular was in force until 2007. Even after the introduction of 'Business Auxiliary Service' the said Circular was in vogue. 3.6.1 Ld. Advocate submitted that at paragraph 12(a) of the Order-in-Original dated 15.04.2015, it is observed that the appellant herein being manufacturer of cars is bound to provide warranty for their products. It is stated that the outside distributors are contractually bound to promote the sale of the appellant overseas. The above finding given by the Department after a perusal of the Show Cause Notice would indicate that the service in dispute is nothing but a warranty dispute. Since the warranty service has already been classified as Authorized Service Station service by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evade payment of Service Tax. 3.9 Ld. Counsel for the appellant also submitted that the appellant had put forward various other pleas such as the amount paid to Overseas Distributors, being in the nature of reimbursement of expenses, is not subject to levy of Service Tax, and also the plea of Commission Agent, etc., before the adjudicating authority. However, such pleas are given up at this stage of the Tribunal. He prayed that the appeals may be allowed. 4.1 On behalf of the Department, Ld. AR Shri. K. Veerabhadra Reddy appeared and argued the matter. He submitted that the impugned orders passed by the adjudicating authority are in congruence with law and very much sustainable both in law and facts. The adjudicating authority has delved at length on the various submissions and evidences on record before adjudicating the matter and has passed a very reasoned speaking order. 4.2.1 There is no doubt that the Overseas Distributors of the appellant are purchasing cars on making payment in foreign currency and the sale of the car is on principal to principal basis. The "Distributor and Sales Agreement" is a tripartite agreement between the appellant, the parent company viz. M/s. Hyun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings are not concerned with the transactions that transpire between the Authorized Repairer and the Overseas Distributor since the said transactions are between two independent commercial entities situated overseas which are also extra-jurisdictional in nature. The Department has been contending from the outset that there is also a service being rendered by the Overseas Distributor to the appellant (situated in India) on reverse charge basis, which is liable to Service Tax and which should not be lost sight of. The appellant is stating that they reimburse only the actual amount incurred towards spares and services used and such reimbursements are from out of earlier consideration received for sale of car. The appellant has already admitted that the Overseas Distributors are required to compensate the Authorized Dealers/Repairers, the landed cost of the parts and accessories replaced as specified in the agreement and labour charges as per the labour time standard and that Overseas Distributors in turn would submit their claim for the amount from the appellant within sixty days. He submitted that the appellant appears to be silent on this aspect, which merits scrutiny by the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Overseas Distributors. The appellant then reimburses the amount incurred by the Overseas Distributors. The chain of transaction can be represented diagrammatically as under : 6.3 From the Annexures to the Show Cause Notice it is seen that the demand is raised on the labour charges for services paid by the appellant to the Overseas Distributors. The appellant being the manufacturer is liable to oblige the warranty claim for which the amount is paid to Overseas Distributors who provide the repair services on behalf of the appellant. The liability to pay Service Tax is cast upon the appellant under reverse charge mechanism, as provided in Section 66A of the Finance Act, 1994 under Business Auxiliary Services. 7.1 For better appreciation, the definition of 'Business Auxiliary Service' as per Section 65 (19) of the Finance Act, 1994 during the relevant period is noticed as under : "[(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 [Explanation. - For the removal of doubts, it is hereby dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... client, including customer care services, are rendered by the Overseas Distributors and such activity also falls within the definition of Business Auxiliary Service. 8.1 After analyzing the arguments put forward by both sides and perusing the records, we do not find that the appellants had paid any incentives to the Overseas Distributors for sales promotion and marketing. The entire demand is on the amount paid by the appellant to the Overseas Distributors for the warranty claims. The adjudicating authority is of the opinion that when the Overseas Distributors establish the network of Authorized Repairers for carrying out the warranty claims on behalf of the manufacturer (appellant herein), the said activity would be customer care service and also provision of service on behalf of the client. It needs to be said that though the Overseas Distributors may have carried out the repair and maintenance services and established the network of Authorized Repairers for the benefit of the manufacturer, the Overseas Distributors have not directly carried out any service to the customer. 8.2 However, when the Overseas Distributor is establishing the network of Authorized Repairers for carryi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has wilfully suppressed facts with intention to evade duty cannot sustain. 10. For the reasons discussed above, we hold that the demand raised invoking the extended period of limitation cannot sustain and requires to be set aside, which we hereby do. 11. Now let us address the demand for the period post 01.07.2012. The Ld. Counsel for the appellant has drawn our attention to the introduction of Place of Provision of Service Rules, 2012. On perusing the impugned order, it is seen that the adjudicating authority has relied upon Rule 3 of the said Rules which deals with place of provision of service generally. Rule 4 speaks about the place of provision of performance based services. The demand is only on the amount paid by appellant to Overseas Distributors for warranty repairs and maintenance. Needless to say, warranty claim for repair and maintenance of cars is a performance based service. As per Rule 4 ibid, when the goods are required to be physically made available by the recipient of service to the provider of service or to a person acting on behalf of the provider of service, in order to provide the service, the location where the service is actually performed is cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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