2024 (6) TMI 499 - AT - Service Tax

CESTAT rules show cause notices invalid after voluntary service tax payment, rejects reverse charge liability for loan facilitation services

M/s. Tanushka Automobiles Pvt. Ltd. Versus Commissioner of CGST & Central Excise, Bhopal

CESTAT NEW DELHI allowed the appeal, holding that show cause notices issued after appellant's voluntary payment of service tax dues were invalid. The ... Short payment/non-payment of service tax - liability to pay service tax under Reverse Charge Mechanism - business Auxiliary service - incentive received, extension warranty commission and unclaimed creditors written off - wrongful availment of CENVAT Credit - extended period of limitation - penalties. Short payment/non-payment of service tax - liability to pay service tax under Reverse Charge Mechanism - HELD THAT:- There is nothing on record to show that there still was shortcoming in the amount so paid. The show cause notice has been issued after the date of payment (28.12.2015) and after the information about said payment (31.12.2015) to the department. The impugned show cause notice is of 10.03.2016. As per the statutory mandate of the aforementioned Section 73(3), the impugned show cause notice should not have been issued vis-à-vis five of the above mentioned spot memos. In such scenario there arises no occasion for imposition of penalties. There have been several decisions of this Tribunal and even of the Hon’ble High Court, wherein it has been held that once the entire proposed payment was made along with the interest prior to the issue of show cause notices and application intimating the said payment has also been filed, there remains no question to impose any penalty - the demand arising have been wrongly confirmed. Levy of service tax - Business Auxiliary Services - incentive received, extension warranty commission - unclaimed creditors written off - HELD THAT:- The apparent fact on record is that the appellants are interested in selling their cars and the respective accessories. The buyers who are interested in buying their cars, if need loan prior the said purchase, they have been referred to the financial institutes. From this admitted factual aspect, to our opinion, it is clear that the appellants actually are promoting their own business by facilitating their customers to avail loan. The clients of the appellants are the said customers. For want of any arrangement between the financial institutes and the appellants, those institutes cannot be called as the service recipients. No question of existence of any service being rendered by the appellant to those financial institutes at all arises merely for the reason that they were given certain space in appellant’s premises - there is no evidence produced by the department either in the form of an agreement or in form of any guidelines from the bank or the financial institutes for the basis of giving commission to the appellants, it is held that appellants were not rendering Business Auxiliary Services to the financial institutes/banks. Levy of service tax - amount shown as “unclaimed creditors written off” - HELD THAT:- It is apparent from the appellant’s submission that some amount against the sale of accessories to the buyers remains in the account of appellant which is not returned to the customers. The said amount, after certain period of time is recorded as written off in the appellant’s record. From no stretch of imagination, the amount received from sale of accessories can be alleged to be an amount towards rendering any kind of service. With these observations, it is held that the demand raised by Spot Memo No.4 for an amount of Rs.3,06,099/- along with the interest has wrongly been confirmed. Extended period of limitation - HELD THAT:- The short payment has already been made good by appellant himself. The said payment may not be the sufficient proof to falsify the alleged suppression with intent to evade the duty. However, the nondeclaration of certain amount in the ST-3 returns per se does not become an act of willful suppression or mis-representation. The burden is upon the department to bring some evidence towards any positive act of the appellant to prove that the appellant had mala fide intent to not to pay the duty - in the absence of any evidence produced by the department, it is held that extended period should not have been invoked. This finding is sufficient to hold that the show cause notice itself is barred by the period of limitation. The show cause notice is held void ab initio vis-à-vis five of the spot memos. It is also held barred by the time of limitation - Appeal allowed. Issues Involved:1. Short payment/non-payment of service tax.2. Liability to pay service tax under Reverse Charge Mechanism.3. Alleged rendering of Business Auxiliary Services.4. Wrongful availing of Cenvat credit.5. Invocation of extended period for demand.6. Imposition of penalties.Summary:Issue 1: Short payment/non-payment of service taxThe appellant, M/s. Tanushka Automobiles Pvt. Ltd., was observed to have short paid service tax for various periods between 2010-11 and 2014-15. The amounts were identified through six Spot Memos. The appellant paid the amounts along with interest for five of the Spot Memos before the issuance of the Show Cause Notice (SCN). The Tribunal held that as per Section 73(3) of the Finance Act, the SCN should not have been issued for these five Spot Memos since the payments were made prior to the SCN. Consequently, the SCN was deemed void ab initio for these five Spot Memos, and no penalties were warranted.Issue 2: Liability to pay service tax under Reverse Charge MechanismThe appellant was found liable to pay service tax under the Reverse Charge Mechanism w.e.f. 01.07.2012, but the amount was unpaid. This was included in the SCN, but since the appellant paid the amount along with interest before the SCN, the Tribunal held that the SCN should not have been issued for this liability as well.Issue 3: Alleged rendering of Business Auxiliary ServicesThe appellant contested the demand under Spot Memo No. 4, which alleged that amounts received as incentives, extension warranty commission, and unclaimed creditors written off were for rendering Business Auxiliary Services. The Tribunal found no evidence of an agreement or arrangement between the appellant and financial institutions to promote their business. It was held that the appellant was promoting its own business by facilitating loans for its customers, not rendering Business Auxiliary Services. Thus, the demand under Spot Memo No. 4 was set aside.Issue 4: Wrongful availing of Cenvat creditThe appellant was alleged to have wrongly availed Cenvat credit of input service amounting to Rs.1,24,589/-. This was included in the SCN, but since the appellant paid the amount along with interest before the SCN, the Tribunal held that the SCN should not have been issued for this liability as well.Issue 5: Invocation of extended period for demandThe department invoked the extended period alleging suppression of facts. The Tribunal held that mere non-declaration in ST-3 returns does not amount to willful suppression or misrepresentation. There was no evidence of mala fide intent by the appellant. Therefore, the extended period should not have been invoked, rendering the SCN barred by limitation.Issue 6: Imposition of penaltiesGiven that the payments were made before the issuance of the SCN and there was no willful suppression, the Tribunal held that no penalties should be imposed. The SCN was void ab initio for five Spot Memos, and the demand under Spot Memo No. 4 was also set aside.Conclusion:The Tribunal set aside the order under challenge, holding the SCN void ab initio for five Spot Memos and barred by limitation. The demand under Spot Memo No. 4 was also set aside. The appeal was allowed.