2013 (10) TMI 1155 - AT - Service Tax

Service tax upheld on commission for loan arrangements under business auxiliary services; incentives treated as non-taxable trade discounts

COMMISSIONER OF SERVICE TAX, MUMBAI-I Versus SAI SERVICE STATION LTD

The CESTAT Mumbai upheld the demand against the assessee for service tax on commission received from banks and financial institutions for arranging loans, ... Authorized service station - Nature of commission received from various banks and financial institutions, through M/s. Maruti Udyog Ltd - Commission received from M/s. Maruti Udyog Ltd. (M/s. MUL) on account of sales/target incentive, incentive on sale of vehicles and incentive on sale spare parts for promoting and marketing the products of M/s. MUL - Held that:- commission received from various bank/finances institution for arranging loan to their prospective buyers comes under the business auxiliary service - the issue is settled in favour of the Revenue in the case of CCE, Jaipur vs. Chambal Motors (P) Ltd.[2007 (10) TMI 552 - CESTAT NEW DELHI] - demand confirmed - decided against the assessee. Extended period of limitation - Held that:- In respect of time bar, the contention of the assessee is that there was a confusion in the Board's circular whether the activity comes under the business auxiliary service or not. We find that MUL was paying service tax on the commission received from various banks/finances institutions. MUL advised the assessee to get registered with the Service Tax department and to pay service tax on this activity. In spite of this, the assessee had not paid service tax though got registered with the Revenue as provider of taxable service in October, 2004. - Decided against the assessee. In respect of sales/target incentive, the revenue wants to tax this activity under the category of business auxiliary service -Held that:- We have gone through the circular issued by MUL which provides certain incentives in respect of cars sold by the assessee respondent. These incentives are in the form of trade discount. - no demand - decided in favor of assessee. Issues:1. Demand of service tax on commission received from banks and financial institutions for promoting 'auto Finance' product.2. Demand of service tax on commission received for arranging 'Auto Finance' loan as Direct Sales Agent.3. Demand of service tax on commission received from Maruti Udyog Ltd. for promoting and marketing their products.4. Applicability of Business Support Service vs. Business Auxiliary Service.5. Time bar for invoking extended period for tax payment.6. Double taxation issue regarding commission passed on by Maruti Udyog Ltd.7. Taxability of sales/target incentives received by the assessee.Analysis:1. The Appellate Tribunal confirmed the demand of service tax on commission received from banks and financial institutions for promoting 'auto Finance' product. The Tribunal held that such activities fall under Business Auxiliary Service, citing precedents like CCE vs. Chambal Motors, establishing tax liability.2. The demand of service tax on commission received for arranging 'Auto Finance' loan was also upheld by the Tribunal. Previous decisions supported the view that such activities constitute Business Auxiliary Service, hence taxable.3. Regarding the demand of service tax on commission received from Maruti Udyog Ltd., the Tribunal dropped the demand, emphasizing the distinction between Business Support Service and Business Auxiliary Service. The assessee's argument based on confusion during the disputed period was not accepted.4. The Tribunal considered the time bar issue for invoking the extended period for tax payment. Despite confusion in the Board's circular, failure to pay tax after registration led to the conclusion that the extended period was rightfully applied.5. The issue of double taxation regarding commission passed on by Maruti Udyog Ltd. was raised. The Tribunal acknowledged that Maruti Udyog Ltd. had already paid tax on the gross amount, hence rejecting the demand for double taxation.6. The taxability of sales/target incentives received by the assessee was debated. The Tribunal reviewed circulars from Maruti Udyog Ltd. and determined that these incentives, in the form of trade discounts, did not constitute Business Auxiliary Service, leading to the dismissal of the Revenue's appeal.7. Ultimately, both appeals, by the assessee and the Revenue, were dismissed by the Tribunal, maintaining the decisions on tax liabilities and applicability of services.