2014 (11) TMI 790 - AT - Service Tax

Branded services subject to service tax liability per CESTAT ruling

The Appellate Tribunal CESTAT Bangalore ruled that services provided by the appellant as an Authorized Service Station of a specific brand are considered ... Waiver of pre deposit - Authorized Service Station service - Held that:- Appellant’s service station is recognized because they used brand name of ‘Maruti’ and owners of vehicles manufactured by Maruti come to the appellant’s premises for obtaining service because they used brand name of ‘Maruti’. In the bills, invoices etc., they mentioned the fact that they are ‘Maruti Authorized Service Station’ There is no doubt that they have extra clientele and additional business because they used the brand name of ‘Maruti’. No doubt that the issue is debatable and requires consideration of precedent decisions, statute etc. which can be done at the time of final hearing. At this stage, prima facie, we consider that the appellant is not able to make out a case in their favour. Therefore, the appellant is required to deposit the entire amount of service tax demanded within eight weeks - Partial stay granted. Issues:1. Whether services provided by the appellant for vehicles of a particular brand are to be considered as a branded service for the purpose of service tax liability.Analysis:The judgment by the Appellate Tribunal CESTAT Bangalore dealt with the issue of service tax liability arising from the services provided by the appellant as an Authorized Service Station of a specific brand. The Revenue contended that the services provided by the appellant for vehicles of this brand should be considered as a branded service, thereby making the appellant liable for service tax. The Tribunal, comprising of Shri B.S.V. Murthy and Shri S.K. Mohanty, heard arguments from both sides and observed that the appellant's service station was recognized due to its association with the brand in question. Customers of vehicles manufactured by this brand specifically visited the appellant's premises for service due to this association. The Tribunal noted that the appellant prominently displayed the brand name in their bills and invoices, identifying themselves as a 'Maruti Authorized Service Station.' This branding led to increased clientele and additional business for the appellant. The Tribunal acknowledged that the issue was debatable and required further consideration of precedent decisions and statutes, which could be done at the final hearing. However, at the interim stage, the Tribunal found that the appellant had not sufficiently made a case in their favor. Consequently, the Tribunal directed the appellant to deposit the entire amount of service tax demanded within eight weeks and report compliance by a specified date. The Tribunal granted a stay against recovery for 180 days from the date of the order, subject to the appellant's compliance with the deposit requirement.This judgment underscores the significance of branding in determining service tax liability and the impact of using a brand name on a business's operations. It highlights the importance of legal arguments, precedent decisions, and statutory provisions in resolving tax disputes. The Tribunal's decision to require the appellant to deposit the service tax amount while granting a temporary stay against recovery reflects a balanced approach to addressing the issue at hand.