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of <h1>Tax Dispute Over Free Services to Company Resolved in Appellant's Favor</h1> <h3>Jaika Motors Ltd. Versus Commissioner of Customs, Central Excise & Service Tax Nagpur</h3> The dispute in this case centered around the demand for tax on providing 'business auxiliary service' to a company, specifically M/s Tata Motors Ltd. The ... After sale service - demand on the ground that appellant having received the consideration in the margin allowed in the dealer agreement - Held that: - the issue stands settled by the case of In ASL Motors Pvt Ltd v. Commissioner of Central Excise & Service Tax, Patna [2007 (11) TMI 73 - CESTAT, KOLKATA], where it was held that When the appellants sold the cars and recovered the amount including the dealers’ margin the intention was to sale the car not to provide free after sales service, Free sale service is only to promote sale – No service tax can be levied on impugned amount, on which sales tax has been already paid - appeal allowed - decided in favor of appellant. Issues:1. Dispute regarding demand of tax on rendering 'business auxiliary service' to a company.2. Inconsistency in the demand confirmed by the original authority and upheld by the impugned order.3. Erroneous basis of demand regarding reimbursement and limitation provision.4. Taxability of free services provided by dealers in the vehicle trade.5. Applicability of service tax on the amount representing dealers' margin already taxed under sales tax.Analysis:1. The judgment involves a dispute over the demand of tax on rendering 'business auxiliary service' to a company, specifically M/s Tata Motors Ltd. The demand was upheld in the impugned order, attributing amounts for 'free services' provided to customers on behalf of M/s Tata Motors Ltd. The penalties were imposed under sections 76, 77, and 78 of the Finance Act, 1994.2. The Chartered Accountant representing the appellant contested the impugned order, highlighting the inconsistency between the demand confirmed by the original authority and the grounds on which it was upheld. The argument was based on the erroneous presumption of seeking reimbursement from M/s Tata Motors Ltd and the limitation provision in the statute. Various decisions were cited to support the appellant's case.3. The Tribunal referred to previous decisions to settle the issue. In ASL Motors Pvt Ltd v. Commissioner of Central Excise & Service Tax, it was clarified that free servicing provided by dealers, funded from margins, should not be subjected to service tax. The judgment emphasized the mutual exclusivity between sales tax, excise duty, and service tax, asserting that the amount representing dealers' margin already taxed under sales tax should not be subject to service tax.4. Similarly, in Indus Motor Company v. Commissioner of Central Excise, it was held that unless evidence of reimbursement for free services is provided, the demand for service tax is based on assumptions and presumptions, lacking merit. The Tribunal allowed the appeals with consequential relief.5. The judgment also cited Commissioner of Central Excise, Indore v. Jabalpur Motors Ltd, where it was established that free services provided to customers are not reimbursed by the vehicle manufacturers. The demand for service tax on such free services was deemed misconceived, and the appeal filed by the Revenue was dismissed. Consequently, the demand in the impugned order was set aside, and the appeal was allowed.
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