2017 (10) TMI 502 - AT - Service Tax

Service Tax Liability Upheld for Selling Insurance Products

The Tribunal upheld Service Tax liability against appellants M/s. AVG Motors Ltd. and M/s. Indus Motor Co. Pvt. Ltd. for providing Business Auxiliary ... Business Auxiliary Service - services in respect of sale of insurance products - The appellants contention is that MUL is paying service tax, and as such, the dealers are not liable to pay any further service tax on the Maruti Finance Dealer pay outs - Held that: - the appellants are doing the service of promotion or marketing of service viz., issuance of insurance policies on behalf of MIBL. The fact that service tax was being paid by MUL to the insurance company along with the insurance premium will not make any difference, when the assessee-appellants are independently providing the service of promotion or marketing, which is covered by Business Auxiliary Service - the assessee-appellants are liable to pay Service Tax on the services performed by them to M/s. MIBL, a fully owned subsidiary of MUL. Penalties - Held that: - the subject matter involves interpretational issues in respect of law of service tax on the subject, the penalties imposed on the appellants are not sustainable. Decided partly in favor of appellant. Issues:Appeal against demand of Service Tax under Business Auxiliary Service category.Analysis:The appeal involved two appellants, M/s. AVG Motors Ltd. (AVGML) and M/s. Indus Motor Co. Pvt. Ltd. (IMCPL), challenging Orders-in-Appeal confirming Service Tax liability for providing Business Auxiliary Services (BAS) related to sale of insurance products on behalf of Maruti Insurance Brokers Ltd. (MIBL) and Maruti Insurance Agency Network Ltd. (MIANL).The Department issued show-cause notices to both appellants, leading to adjudication and confirmation of Service Tax liabilities along with penalties. The appellants contended that since Maruti Udyog Ltd. (MUL) was paying service tax, they were not liable for additional tax. However, it was established that the appellants were independently providing services of promotion or marketing, specifically issuance of insurance policies, falling under Business Auxiliary Service as defined in the Finance Act, 1994.The Tribunal referenced previous decisions to support the liability of the appellants for Service Tax. It was noted that the appellants received commission for promoting services of MIBL, a fully owned subsidiary of MUL, and were involved in activities covered under Business Auxiliary Service. The Tribunal also referred to a Circular by CBEC regarding taxation of commission received by automobile dealers from financial companies.Based on the facts and legal provisions, the Tribunal upheld the Service Tax liability against the appellants. However, considering the interpretational nature of the issues, the penalties imposed on the appellants were deemed unsustainable and set aside. Consequently, the impugned orders were modified to uphold the Service Tax liability while setting aside the penalties.In conclusion, the appeals were partially allowed, with the Service Tax liability sustained but penalties imposed being overturned due to interpretational issues related to the law of service tax.