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TMI Blog2024 (4) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... stomers. The appellant reimburses various expenses, like Export warranty, Product recall charges and Goodwill warranty, incurred by the distributors in view of the Agreements. Revenue initiated proceedings against the Appellant for the Relevant Period demanding Service Tax under Business Auxiliary Services ('BAS") on account of the expenses reimbursed to the foreign distributors under reverse charge mechanism; Accordingly, Show Cause Notices, dated 08.06.2009 (for the period 18.04.2006-2008), 30.09.2009 (for the period 2008-09) and 30.07.2010 (for 2009-10); Adjudicating Authority passed the Impugned Order-in-Original, No. 74-76/RDN/2010 dated 11.01.2011, confirming the demand of Service Tax of Rs. 5,74,43,722/-, along with interest and penalties under Sections 77 and 78 of the Finance Act,1994, by invoking the extended period of limitation and holding that the services rendered by the foreign distributors qualify as Business Auxiliary Service under sub section (i), (ii) and (iii) of Section 65(19) of the Finance Act, 1994 ('the Act') and the same were rendered on behalf of the Appellant. Hence, this appeal. 2. Shri B.L. Narsimhan, assisted by Ms. Krati Singh and Ms. Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant and selling it to the customers in open market and act as sales dealer of the Appellant as per Article 12(b) of the Agreement; thus, the services rendered by the foreign distributors/ dealers etc. cannot be said to be in nature of promotion or marketing of goods of the Appellant and hence not covered by sub-clause (1) of the definition of BAS. He relies on * M/S. Rohan Motors Limited Vs CCE, Dehradun 1997 (91) ELT 540; * Philips India Ltd. Vs CCE, Pune 2020 (12) TMI 1014- CESTAT New Delhi * Mahindra & Mahindra Ltd. Vs CCE, Bombay 1998 (103) ELT 606 (Tribunal) (affirmed by Supreme Court in 1999 (111) ELT A126 (SC)] * CCE, Mysore Versus TVS Motors Co. Ltd 2016 (331) ELT 3 (SC.) 3.1. Learned Counsel for the appellants submits also that clause (ii) under 'BAS' covers promotion or marketing of service provided by the client; it is not applicable in the instant case as the Appellant does not qualify as client of the foreign dealer/ distributors; the Appellant is not providing any service to the foreign dealers/distributors. He submits that the Adjudicating Authority wrongly held that the foreign dealers are rendering Business Auxiliary Service by maintaining an eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are more specifically covered under the definition of authorised service station services; Board Circular No. B11/1/2001-TRU, dated 9-7-2001 states that any service or repair provided by an Authorized Service Station in relation to motor cars and two-wheeled motor would be covered under the ambit of Service Tax; Circulars No. 96/7/2007-ST dated 23.08.2007 and No. 87/05/2006- ST dated 06.11.2006 reiterate the same; 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. He submits that without prejudice the above, since the services provided by the foreign distributors are more specifically covered under authorised service station, the demand cannot be confirmed under a general category i.e., under business auxiliary service. He relies on the following cases: * M/s. Uttam Toyota Vs CCE & ST, Ghaziabad, ST/1094/2010-CU (DB) CESTAT Allahabad order dated 27.12.2018. * M/s. Uttam Toyota Vs CCE, Ghaziabad 2019- TIOL-2930-CESTAT-ALL 5. Learned Counsel for the appellants submits further that even if the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and penalty under Section 77 and 78 does not arise; penalty under Section 78 cannot be imposed; the department was aware about the activities of the Appellant at the time of issuing SCN for the period 2004-05 to 2007- 08; extended period cannot be invoked for subsequent period as there was no suppression on part of the Appellant. He relies on Nizam Sugar Factory Vs CCE, AP 2006 (197) ELT 465 (SC). 9. Shri Nikhil Kumar Singh, assisted by Shri Narinder Sigh and Shri Yashpal Singh, Learned Authorised Representatives for the Revenue, reiterates the findings of the impugned order. He submits that the argument of the appellants on the ground that the notice did not specify the sub clause of 'BAS' and reliance on the tribunal in the case of ITC Ltd- 2014(33) STR 67 (Tri-Del) is not correct as Hon'ble High Court of Delhi, on an appeal filed by the department, vide order dated 23.07.2014 (2014(36) STR.481), held that the object and purpose of show cause notice is to inform the assessee so that reply or submissions can be made and relevant facts which are in the knowledge of the assessee can be brought on record; the judgement was upheld by Hon'ble Apex Court 2015(38) STR J362 (SC). He su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry; these distributors are Authorized service stations for those customers who purchase the vehicles for them; as the ownership of the vehicles get transferred to those customers after the purchase of vehicles and it cannot be in any way construed that the services of repair/service of motor vehicle is being done by the distributors for the appellants. 12. Learned Authorised Representative takes us through different agreements and submits that no cognizance of this agreement dated 01.10.2003 can be taken as the appellant is not a party to this agreement; it is also not on record whether the appellant has paid any amount in reference to this agreement; this agreement at best, be considered to know the activities carried out by the distributors for Maruti Suzuki Ltd. He submits that as regards Distributorship agreement dated 01.01.2009, between Maruti Suzuki, India Ltd, New Delhi and CMC motors groups Ltd., Nairobi, Kenya, (in short, CMC Motors), it is seen that CMC Motors has been appointed as distributor for selling and distributing the products of the appellants in the jurisdiction enter territory of Kenya; as per the agreement the distributor is required to carry out various act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant products; the appellant sells the cars to the Overseas Distributors who in turn sell it to the ultimate consumers; 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; 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; the Overseas Distributors are mandated to promote and market the sale of cars and such sales promotion and marketing is also an activity that falls within the definition of Business Auxiliary Service; 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 adjudicating authority has clearly observed that provision of service on behalf of the client, including customer care services, are rendered by the Overseas Distributors and such activity also falls within the definition of Business Auxiliary Service. 14.1. Learned Authorized Representative relies on the case of Hyundai Moto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls sold by the service provider to the service recipient, with the condition that there is documentary proof indicating the value of the said goods and materials; as per the ratio of Tribunal held in the case of Ador Fontech Ltd. - 2014(36)STR; Mahendra Engineering Limited 2015 (38) STR 233 (All.). 146(Tri-Mumbai) and Tanya Automobiles (P) Ltd. vs. CCE - 2016(43) STR. 155 (Tri. -All), the exemption is available only when goods are sold during the course of the provision of service; there is documentary evidence in relation to the sale of said goods and if the appellant have not availed Cenvat credit on the said goods/ materials. He submits that the case of Hon'ble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd 2013 (29) STR 9 (Del.), is not applicable to the facts of the instant case as the same are totally different; the instant case which governed by the provisions of Rule 7 of the Service Tax (Determination of Value) Rules, 2006. He relies on Bhandari Hosiery Exports Ltd. 2010 (18) STR 713 (P & H). 16. Learned Authorised Representative submits that in view of above provisions, it is clear that import of all the taxable services has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prasad Kaikadi- 2004 (1) SCC 681 and Government of West Bengal Vs Tarun K. Roy & Others - 2004 (1) SCC 347 that judgments which are rendered per incuriam statutory provisions are binding Higher Courts' judgments or binding judgments of co-ordinate benches have no precedential value and hence to be ignored. Larger Bench of the Tribunal in the case of Urison Cosmetics Ltd. - 2006 (198) ELT 508 (Tri. LB) held that Hon'ble Madras High Court judgment in identical circumstances was per incuriam; Hon'ble Apex Court affirmed this decision in the case of Kraftech Products- 2008 (22) ELT 504 (SC). 19. Heard both sides and perused the records of the case. Learned Authorized Representatives for the Department raises a preliminary objection that there were three show-cause notices involved in the case and they were adjudicated by the Commissioner of Service Tax, New Delhi vide three Orders-in-Original No.74-76/RDN/2010 dated 11.01.2011; in view of the Rule 6A of CESTAT (Procedure) Rules, 1982, the appellant was required to file a separate appeal against each Orderin- Original; he relies on AIIMS Industries Ltd.- 2014 (313) ELT 20 (Guj.) and Shree Cement Ltd. - 2009 (247) ELT 383 (Tri.Del.). On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as the appellant is concerned. This is a consequence of Explanation (1) to Rule 6A. 7. In the present matters, in respect of which this reference is preferred to the Bench, the subject matter of the challenge in each of the appeals is to a composite order-in-original bearing distinct numbers pertaining to multiple show cause notices. In the circumstances it is Rule 6A and not Explanation (1) that applies. As a consequence, one appeal against each of the impugned orders-in-original, even though distinct numbers are provided by the adjudicating authority to each of the composite orders, would suffice. 19.3. On going through the Rule 6A and the decision as above, we find that as per the procedure so many appeals need to be filed as there are Orders-in-Original. In the instant case, though there are three showcause notices, they have been dealt by a single order. Assigning three numbers to one impugned order does not make it three different orders. Therefore, we find that the appellants have correctly filed one appeal against one impugned order. The preliminary objection raised by the Department has no force and hence is not acceptable. 20. One of the main contentions of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Service". We find that the show-cause notice mentions at Para 7 that the appellants are incurred an expense on account of advertisement for sale promotion which appear to be covered under BAS. Thus, it is seen that in the instant case, the purport of the show-cause notice is to put the appellants on notice that they have received services from their foreign dealers and have not discharged due service tax under the BAS. Though, the specific sub-clauses have not been enumerated, the intent of the notice has been made clear and therefore, in view of the judgment of the Hon'ble High Court cited above, we find that the proceedings are not vitiated. In view of the same, we find that judgments cited by the appellant are not applicable in the particular facts of the case. 21. Now, we turn our attention to the main issue involved in the case i.e. whether the appellants have received services under "Business Auxiliary Services" from their overseas distributor/ dealers and if so whether they are liable to discharge duty on Reverse Charge Mechanism. The appellants entered into several distributorship agreements with overseas dealers; in terms of the said agreement, the distributors are auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... motion. Therefore, we are not in agreement with the submission of the learned Counsel for the appellant that the relationship between the appellant and the overseas dealers is on a principal-to-principal basis. As long as the overseas dealers/ distributors are rendering some service on behalf of/ on account of/ in connection with the business of the appellant, they take the role of the manufacturer/ appellant. The overseas dealer/ distributor is receiving a consideration for this purpose. Therefore, we find that there is a force in the argument of the Department that the services rendered are in the nature of BAS. 22.1. We find that Chennai Bench of the Tribunal has gone into an identical issue concerning a similarly placed manufacturer of motor cars, i.e Hyundai Motors India Pvt. Ltd. (supra), having similar arrangements with the overseas dealers has decided that the overseas dealers/ distributors are rendering services classifiable under BAS to the appellants therein. The Bench observed as follows: 6.1 As per the show cause notice dated 28-3- 2004, it is stated that as per the agreements entered into between M/s. Hyundai Motor Corporation, Korea and the Overseas Distributors, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 (vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, but does not include any activity that amounts to "manufacture" within the meaning of clause (f) of Section 2 of the Centrai Excise Act, 1944 (1 of 1944). .......". 7.2 In the show cause notice, the activity that is sought to be brought within the definition of 'Business Auxiliary Service' is the handling of warranty claims and monitoring of repair and maintenance services. Paragraph 3 of the show cause notice, where the definition of Business Auxiliary Service is reproduced by the Department, highlights sub-clause (vi) of the definition so as to allege that the Overseas Distributors are providing service of warranty repairs on behalf of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on principal-to-principal basis. We have gone through the cases and find that the cases are not applicable as the facts are not comparable. As submitted by the learned Authorized Representative for the Department, they are on the issues which are different from those discussed in the instant case. For the same reason, we find that the contention of the learned Counsel for the appellants that the decision of the Chennai Bench of the Tribunal in the case of Hyundai Motors (supra) be considered as per incuriam, is not acceptable. We find that as the case of Hyundai Motors is squarely applicable with the facts of the case, there is no need to refer to the cases cited by the appellants in this regard and the facts do not warrant us to opine that the order in Hyundai Motors is per incuriam. 24. Learned Counsel for the appellants has taken the alternate plea that the issue is revenue neutral as whatever amounts they pay as service tax on RCM basis would be available to them as CENVAT credit. We find that this argument is not acceptable as it would disturb the very scheme of CENVAT credit. Had the appellants paid duty as applicable, there was no way that anybody would have stopped them ..... X X X X Extracts X X X X X X X X Extracts X X X X
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