2009 (4) TMI 130 - AT - Service Tax

Tribunal Rules in Favor of Appellants on Tax Levy Dispute

The Tribunal found in favor of the appellants in a case concerning the levy of tax on commission received by automobile dealers for arranging loans on ... Service tax liability on business auxiliary services - commission for arranging loan - Board Circular clarifying levy - voluntary payment and absence of mala fide - invocation of Section 80 for relief from penalty - imposition of penalties for non-payment of service taxService tax liability on business auxiliary services - commission for arranging loan - Board Circular clarifying levy - Liability to pay service tax on commission received for arranging loans to vehicle purchasers - HELD THAT: - The Tribunal found that the appellants, acting as authorised automobile dealers and arranging loans for customers (functioning as directing/marketing agents for a financial institution), rendered taxable Business Auxiliary Services introduced in July, 2003. A prior doubt regarding levy was subsequently clarified by the Board's circular dated 06.11.2006, but on the material the appellants had received commission on loans and rendered the relevant service. The appellants made partial voluntary payment in December, 2004 and paid the balance before the adjudication order. Having regard to these facts and the clarification issued by the Board, the Tribunal upheld the demand of service tax on the commission.Demand of service tax on the commission received by the appellants is upheld.Voluntary payment and absence of mala fide - invocation of Section 80 for relief from penalty - imposition of penalties for non-payment of service tax - Sustainability of penalties imposed for non-payment of service tax and availability of relief - HELD THAT: - The Tribunal noted that the appellants voluntarily paid tax (partly in December, 2004 and the balance before adjudication) after the levy arose in July, 2003, and there was no finding of mala fide conduct. Considering the nature of the dispute as arising from a new levy, the timing of voluntary payments and the absence of deliberate concealment, the Tribunal held that penal provisions should not be sustained. The Tribunal therefore invoked Section 80 to grant relief and set aside the penalties that had been imposed under the service tax regime.Penalties imposed on the appellants are set aside and relief under Section 80 is granted.Final Conclusion: The appeal is allowed: the tax demand for commission as Business Auxiliary Services is upheld, but the penalties imposed for non-payment are set aside in view of voluntary payment, absence of mala fide and invocation of Section 80; consequential relief follows. Issues: Levy of tax on commission received by automobile dealers, imposition of penalty under Section 75A, 76, 77 & 78 of the Finance Act, 1994, non-disclosure of rendering taxable service, applicability of service tax law, voluntary payment of tax, invocation of Section 80 of the Act.Analysis:1. Levy of Tax on Commission:The issue revolved around the doubt regarding the levy of tax on commission received by automobile dealers acting as 'directing marketing agent' for financial institutions. The Board's Circular dated 06.11.2006 clarified this aspect. The appellants arranged loans on behalf of financial institutions and received commission. They voluntarily paid the tax in December 2004 for the period from July 2003 to December 2004. The Tribunal found no mala fide intention on the part of the appellants. Consequently, the imposition of penalty under Section 78 of the Finance Act, 1994 was deemed unwarranted.2. Imposition of Penalty:The appellant argued that the penalty imposed under Section 75A, 76, 77 & 78 of the Finance Act, 1994 was not sustainable as they had already deposited the tax amount before the adjudication order. The Tribunal considered the facts and circumstances, noting that the appellants paid the tax voluntarily in December 2004 with interest. Given that there was no dispute regarding the payment of tax and the new levy of service tax in July 2003, the Tribunal set aside the penalties imposed on the appellant.3. Non-Disclosure and Applicability of Service Tax Law:The Department reiterated that the tax was levied in July 2003, and the appellants had not obtained registration under the service tax law during the relevant period. It was contended that the fact of providing taxable services was not disclosed by the appellants. However, the Tribunal found that the appellants were engaged in providing services to customers obtaining loans for purchasing vehicles, and they had paid the tax voluntarily in December 2004. The Tribunal upheld the demand of duty but set aside the penalties, considering the voluntary payment and lack of mala fide intent.4. Invocation of Section 80 of the Act:The Tribunal invoked Section 80 of the Act, considering the appellants' partial payment of tax before the show cause notice and the balance amount before the adjudication order. The Tribunal concluded that it was a fit case for invoking Section 80, leading to the setting aside of the penalties while upholding the duty demand. The appeal was allowed with consequential relief, emphasizing the voluntary payment of tax and the absence of mala fide intentions on the part of the appellants.