TaxTMI 
TaxTMI 
2022 (11) TMI 948
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....irloskar allowed discount in price of vehicles depending upon the quantum of vehicles purchased by the appellant, whether such discount is in the nature of commission and chargeable to service tax under "Business Auxiliary Service" category? (3) Whether the appellant is liable to pay amount @ 5% or 7% of the trading activity in view of availment of credit on common input services or proportionate reversal of Cenvat attributable to trading business was substantial compliance of Rule 6(3) of Cenvat credit Rules? Whether Rule 6 was applicable to "trading" prior to 01.04.2011? (4) Whether Cenvat credit for steel and cement used for construction of showrooms was liable to be recovered from the appellant, though such Cenvat was reversed by the appellant and such reversal was recorded in journal vouchers and books of accounts? 2. The brief facts of the case are that the appellant is a licensed/ approved dealer of M/s Toyota Kirloskar Motors Pvt. Ltd. who are manufacturer of Toyota brand vehicles and also spare-parts of such vehicles. Accordingly, M/s. Toyota Kirloskar have been selling vehicles as well as spare parts to the appellant under invoices issued on the appellant. The appell....
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....cles purchased by the appellant. The department treated the said discount as commission and proposed the demand of Service Tax on such commission under business auxiliary services category. (3) Since, the appellant have availed the Cenvat credit on common input services demand was made @ 5%/6%/7% of the value of the trading business of the appellant interms of Rule 6(3) of Cenvat credit Rules for the period prior to 01.04.2011 and thereafter also. (4) The appellant is not entitled for Cenvat credit on the cement and steel used for construction of their showrooms. On the above issues the Adjudicating Authority has adjudicated 7 show cause notices by one common impugned order dated 11.01.2021. The detail of the demand as per show cause notice is as under: Sr. No. SCN No.& Date Service tax on spare parts and lubricants Service Tax on" Sales incentive" Demand under Rule6(3) of the Cenvat Credit Rules. Cenvat credit on cement and steel Total of SCN (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) 1. STC/4 - 17/O&A/ 12-13 dated 23.10.2012 5,20,39,274 1,07,507 2,09,34,919 78,41,493 8,09,23,193 2. STC/4- I4/O&A/ 13-14 Dated 19.6.2013. 2....
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....ellant was specifically asked to produce invoices to show VAT payment, but the appellant produced only 7 bills under a letter dated 06.07.2011 and that the appellant has not produced VAT returns." He submits that the said statement of the Commissioner is suffered from factual error as the personal hearing was conducted only in respect of one show cause notice on 14.07.2016 when the appellant was asked to submit specimen bills of the Authorized Service Station, and extract of ledger and some accounting details. The appellant under the covering letter dated 28.07.2016 submitted specimen bills and other accounting details. No further documents were ever called for thereafter, and the personal hearing for all 7 show cause notices was thereafter held after 4 years, on 23.09.2020, and during this hearing also the adjudicating Authority has not asked for all the bills of the Authorized Services Station for April, 2007 to June, 2017. He submits that if the Adjudicating Authority was not satisfied with the specimen bills submitted by the appellant. He could have asked for further details during the personal hearing, he submits that it is not a case where the adjudicating Authority called fo....
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....principle basis. 3.3 As regard the demand of an amount 5% or 7% in terms of Rule 6(3) of Cenvat credit Rules. He submits that purchasing and selling of motor vehicles is a trading activity, but such trading was not in the nature of "exempted services" till 31.03.2011. By amending Rule 6(1) of Cenvat Credit Rules by Notification No. 3/2011-CE (NT) dated 01.03.2011, trading was deemed to be exempted service from 01.04.2011 only. Therefore, Cenvat credit of common input services was not to be reduced or denied even if such service were attributable to trading activity, upto 31.03.2011. In support of his this submission, he placed reliance on the following judgments: * My Car (Bhopal) Pvt. Ltd. 2019 (22) GSTL 273 (Tri.-Del.) * Marudhan Motors 2017 (47)STR 261 (Tri. Del.) * Avon International Pvt. Ltd. 2017 (5) GSTL 376 3.4 He further submits that it is a settled law that even though an assessee has not strictly complied with the procedure of Rule 6(3A) of the Cenvat credit Rules by submitting an intimation for proportionate reversal of Cenvat Credit of common inputs and input services attributable to the exempted final transactions, it is permissible to reverse proportionate cr....
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....tion to sale of their vehicles. (3) Demand of Cenvat under Rule 6(3) of Cenvat Credit Rules equal to 5/7% of the value of trading activity. (4) Demand of Cenvat credit availed on cement and steel. 5.2 As regard demand on value of spare parts and lubricants, the Adjudicating Authority held that the value of spare parts and lubricants should be included in the Gross value of Authorized Service Station Services. In this regard to ascertain the actual nature of the transaction, we reproduce the relevant invoice for service of Authorized Service Station and spare parts and lubricant, the same is scanned below: From the above invoice it is observed that though the appellant have raised one invoice for service and sale of spare parts and lubricants, but both were clearly indicated separately in the invoice, and wherever there is service component, the Service Tax was charged and wherever there was sale of spare parts and lubricants the VAT was charged. It is clearly shows that during the provision of service of Authorized Services Station there are two components, one is service portion and other is sale of spare parts and lubricants. Since, the appellant admittedly paid the....
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....e Act, 1994. Moreover, even if the part replaced during repair and maintenance of the vehicle is considered as part of the overall service of the authorized service station, since the description of parts of quantity and value was clearly shown separately in the invoice the same is covered under exemption Notification No. 12/2003- S.T. and for this reason also no service tax can be demanded on the sale of the parts. As per our above discussion, we are of the considered view, that service tax on the value of parts used for repair and maintenance of vehicle is clearly not sustainable. The impugned order is set aside. The appeal is allowed." * Tanya Automobiles (P) Ltd Vs. CCE & ST, Meerut -l -2016 (43) STR 155 (Tri.-All.) "The appellant is an Authorized Service Station of Motor Vehicles. A. show cause notice dated 19-4-2012 was issued subsequent to audit during the December, 2010/January, 2011 wherein it appeared that the appellant was paying Service Tax on the labour charges only and not paying ST on value of spare parts and lubricants used in the course of servicing of the motor vehicles. It appeared to Revenue that the practice was not in tune under Rules 5 & 6 of Service Tax ....
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.... an amount of Rs. 1,10,635/- for the period April, 2011 to December, 2011 which was confirmed by the Asstt. Commissioner along with interest and further penalty was imposed under Section 76 @ Rs. 200/- for every day during failure continue or at the rate of 2% of such tax, per month, whichever is higher up to the period 9-5-2008. Penalty of Rs. 10,000/- was imposed under Section 77 and Rs. 4,74,146/- under Section 78 of the Finance Act. 4. Being aggrieved, the appellant preferred an appeal before the Commissioner (Appeals), who vide the impugned order has been pleased to reject the appeal and has upheld the Order-in- Original. 5. Being aggrieved, the appellant is in appeal before this Tribunal. 6. The learned Counsel for the appellant urges that the issue is no longer res integra as the same stands settled by order of another Division Bench of this Tribunal in the case of Samtech Industries v. Commissioner of Central Excise - 2015 (38) S.T.R. 240 (Tri.-Del.), wherein the assessee was providing the service of repairing transformer and was using consumables like transformer oil and also component parts being coil etc., this Tribunal held, in view of the fact that it is not disp....
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.... brings to our notice that in similar facts and circumstances in the case of M/s. BalajiTirupati Enterprises, the C.B.E. & C. (Legal Cell) vide their letter dated 27-9-2013 addressed to the Commissioner of Central Excise, Meerut has observed as follows : - "The matter has been examined. Upon examination, it has been observed that the party has specifically mentioned the cost of items supplied/sold and there is documentary proof specifically indicating value of the goods. In this situation in view of the Notification No. 12/2003-S.T., dated 20-6-2003 and Hon'ble Supreme Court decision in the case of Commissioner v. Jain Brothers - 2012 (28) S.T.R. 162 (S.C.) demand of Service Tax against the party for the cost of goods supplied during repair does not appear sustainable. Therefore, the Board is of the view that in the overall facts and circumstances of the case, no purpose would be served in pursuing SLP in the matter." 6.3 He further urges that in view of the fact that Board have accepted the legal position and have not filed further appeal in the matter, the appeal is fit to be allowed. 7. Heard learned DR, who supports the impugned order. On query from the Bench, as regards....
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....d by any service provider in the course of providing a taxable service, all such expenditures or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value of the services for the purpose of charging Service Tax on the said service, unless such costs or expenditure have been incurred by the service provider as "Pure Agents" of the service recipient. However, this Rule has been struck down as ultra vires the provisions of Section 66 & Section 67 of the Finance Act, 1994 by Hon'ble Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. v. Union of India & Others Ltd. reported in 2012-TIOL-966-HC-Del.-ST =2013 (29) S.T.R. 9 (Del.). In view of this judgment of Hon'ble Delhi High Court, the value of goods used for providing the service, which had been shown by the appellant separately in their invoices and on which Sales Tax/VAT had been paid, cannot be included for assessable value and no Service Tax can be charged on the same. The impugned orders, therefore, are not sustainable. The same are set aside. The appeals are allowed. Miscellaneous Application No. ST/Misc/60886/2013 for extension ....
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....ed 23-8-2007 (para 36.03) has specifically clarified that Service Tax is not leviable on a transaction treated as sale of goods and subjected to levy of Sales Tax/VAT. Whether a given transaction between the service station and the customer is a sale or not, is to be determined taking into account the real nature and material facts of the transaction. Payment of VAT/Sales Tax on a transaction indicates that the said transaction is treated as sale of goods. "Any goods used in the course of providing service are to be treated as inputs used for providing the service and accordingly, cost of such inputs form integral part of the value of the taxable service". Where Spare parts are used by a service station for servicing of vehicles, Service Tax should be levied on the spare parts, including the value of the spare parts, raised by service provider, namely, service station. However, the service provider is entitled to take input credit of Excise Duty paid on such parts or any goods used in providing the service wherein value of such goods has been included in the bill. The service provider is also entitled to take input credit of Service Tax paid on any taxable service used as input....
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....Udyog Ltd. For bringing these parts into their service station, they have to incur octroi and other local taxes, freight, loading and unloading charges, etc. Therefore, while selling these parts to the clients as part of servicing activity, they include the cost incurred by them towards freight, loading, unloading, etc., as 'handling charges' and pay sales tax on the goods on the value inclusive of handling charges. Sometime they sell the parts as such without undertaking any service/repair activity and in such cases also they collect handling charges and discharge the sales tax liability. The present demand is in respect of handling charges collected by the appellant as part of the value of the goods when a composite, activity of sale as well as services are involved on the ground that the handling charges are towards service charges and hence they are liable to Service Tax. The learned counsel submits that the handling charges form part of the value of the goods sold on which sales tax/VAT liability has been discharged and this is towards the freight/loading and unloading charges involved in handling of the automobile components procured from M/s. Maruti Udyog Ltd. and they have ....
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....andling charges are incurred in connection with the procurement of the parts. If that be so, they will obviously form part of the value of the goods when they are subsequently sold. 5.1 Section 67 of the Finance Act, 1994 mandate levy of service tax on a value or consideration received for rendering the services. Therefore, any consideration received for supply of goods is not covered within the scope of Section 67. The decisions of the Tribunal in the case of Ketan Motors Ltd. and Dynamic Motors, cited supra, also support this view. 6. Accordingly, the impugned order is clearly unsustainable in law and therefore, the same is set aside with consequential relief, if any, in accordance with law." * Ketan Motors Ltd. Vs. CCE & ST, Nagpur-2014 (33) STR 165 (Tri.-Mumbai) "5. We have carefully considered the rival submissions. As the issue lies in a narrow compass, after dispensing with the requirement of pre-deposit, we take up the appeal itself for consideration. 5.1 In para 3.2 of the impugned order it is stated that the appellant had furnished the following information and documents vide letter dated 21-9-2011: (i) Year wise details of value of spare parts used during the....
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.... the appeal is allowed by way of remand. The stay application is also disposed of." From the above judgments it is seen that various Benches of this Tribunal have taken a consistent view in the identical facts of the present case that where during the provision of Authorized Service Station Services, the spare parts and lubricants sold and VAT thereupon was paid the value of such spare parts and lubricants would not attract Service Tax. Moreover, in some of the judgments, even the fact that one common invoice was issued showing both service part and sale of spare parts with payment of VAT/sales tax, is absolutely same. In view of the above judgments, issue involved in the present case is squarely covered. Hence, the demand of Service Tax on the value of spare parts and lubricants is not sustainable in the present case. 5.3 The second issue is that the Adjudicating Authority confirmed the demand of Service Tax on sales incentives given by M/s. Toyota Kirloskar Motors Pvt Ltd. to the appellant in connection with sale of their vehicles to the appellant which were subsequently sold by the appellant to their customers. In this regard to arrive at the conclusion whether the incentive g....
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....D/2011 and M/1318/WZB/AHD/2011 dated 27.07.2011 wherein this Tribunal directed the Commissioner (Appeals) to set aside the demand of service tax on sales incentives if the appellant proves that incentive / discount was received for trading or buying and selling. The Commissioner (Appeals) held that the appellant had purchased the cars from M/s. Toyota Kirloskar Motor Pvt. Ltd. on their own account on payment of VAT and sold to the clients on payment of VAT. The Commissioner (Appeals) also held that the transaction was principal to principal basis and the service tax was not payable under the category of BAS. From the above, it is not in dispute about the transaction even in the present case being identical and sales incentive given by M/s Toyota Kirloskar Motors Pvt Ltd to the appellant is nothing but in connection with purchase and sale of the vehicles. Hence, the same can not be considered as commission against any service by any stretch of imagination. This issue has been considered time and again and it was held as under: * CST, Mumbai - l V/s. Sai Service Station Ltd.-2014 (35)STR 625 (Tri.-Mum.) "18. In respect of sales/target incentive, the Revenue wants to tax this act....
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.... agreement particularly the following clause: "5. The Wholesale Distributor shall sale the goods at the price as determined by the Manufacturer. It shall not charge anything extra over and above the said price. The Manufacturers shall not be responsible for any loss of goods after it leaves the factory premises. Wholesale Distributor would be the owner of the goods once same are supplied to them by the manufacturer from the factory gate and the Wholesale Distributor shall take possession of the goods from the factory gate and shall transport the same to its godowns at its own expenses." It is observed from the above para that after supply of goods by the manufacturer the ownership of goods is transferred to the wholesale distributor who is the appellant here. The sales invoice raised by the manufacturer is scanned below: From the agreement coupled with the above invoice it can be seen that the transaction between the manufacturer M/s. Gunaji and the appellant is clearly of sale. In the invoice the manufacturer has charged 20% VAT the transaction is clearly at arms length hence sale transaction on principal to principal basis. From the invoice, it is also observed that a trade....
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....n common input service used in taxable and exempted services, he has to pay 5%/6%/7% as applicable from time to time. In this regard we find that the demand on this count was raised for the period from 2007-08 to 2012-13. As per provision of Cenvat Credit Rule 6 it has application in case the assessee is providing taxable and exempted service. The trading activity in respect of which the demand was raised under Rule 6(3) under a fiction of law made exempted service only with effect from 01.04.2011 by insertion of explanation under Rule 2(e) by notification No. 3/2011-CE(NT) dated 01.03.2011. In view of this amendment it is clear that the trading activity was not defined as exempted service prior to 01.04.2011. Therefore, the trading activity not being an exempted service during period 2007 to 2011, Rule 6(3) cannot be made applicable during such period. It is a settled law that any statutory amendment cannot be made applicable retrospectively unless the effect of retrospective is enacted by the parliament. Therefore, trading being exempted service is effective only from 01.04.2011. Hence, the demand under Rule 6(3) on trading activity for the period 2007-08 to 2010-11 is wholly ill....
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....tment also had earlier taken the stand to this effect vide Commissioner (Appeals) order No. 34/2013, dated 5-2-2013. 5. Heard both the sides and perused record. The respondent has carried out, during the disputed period, the taxable service of authorized service station. They also carried out, from the same premises, the activity of trading of four wheelers. They have availed Cenvat credit of various input services which the Department has claimed has been utilized both for the taxable service as well as trading. The stand taken by the Department is that the activity of trading is to be considered as exempted service even though such activity has been specifically inserted as an exempted service only w.e.f. 1-4-2011 vide Notification No. 13/2011-C.E. (N.T.). 6. Both the authorities below have taken the clear stand that the activity of trading has come under the category of exempted service only w.e.f. 1-4-2011 and the said amendment carried out to Cenvat Credit Rules cannot be considered as having any retrospective effect. Therefore, we find no reason to interfere with the impugned order. The appeal is accordingly dismissed." * Marudhan Motors V/s. CCE, Jaipur-ll - 2017 (47) ....
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....with the statutory mandates. Therefore, I do not find any merits in the impugned order and allow the appeal in favour of the appellant." * CCE, Ghaziabad V/s. Avon International P. Ltd.-2017 (5) GSTL 376 (Tri.-All.) "The present two appeals are arising out of same impugned Order-in-Appeal No. GZB-EXCUS-000-APP-11-14-15, dated 28- 4-2014. Therefore, they are taken together for decision. Appeal No. E/54591/2014 is filed by M/s. Avon International Pvt. Ltd. and Appeal No. E/53649/2014 is filed by Commissioner of Central Excise, Ghaziabad. M/s. Avon International Pvt. Ltd. have submitted compliance to interim order No. 05/2016, dated 27-1-2016. 2. The brief facts of the case are that appellant-manufacturer was issued with show cause notice dated 28-3-2013 wherein there was allegation that during the period from April, 2010 to March, 2011 they have cleared raw materials such as plastic granules re-processed, Calcium/Mineral powder fabric and Glass on which they did not avail Cenvat credit and sold them and it appeared to Revenue that such activity was trading and therefore since Cenvat credit of Service Tax paid on inputs services had gone into activity of manufacturer as well as ....
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....t is required to reverse/ pay back Cenvat Credit amount in accordance with formula laid down under Rule 6(3A) (c) (iii) of Cenvat Credit Rules, 2004, for such trading business and admittedly such amount has been worked out by the appellant in accordance with this formula and reversed/ paid back also. On the payment of such amount or reversal thereof demand of 6% of the value of trading activity is clearly not justified. This issue has been considered in various judgments some of the judgments are referred below: 5.6 Hello Minerals Water (P) Ltd. V/s UOI reported in 2004 (174) ELT 422 (All): This is a judgement rendered by Hon'ble Allahabad High Court on this issue. In para 4 of the judgement, the Hon'ble High Court of Allahabad has observed that the issue was whether reversal of credit after availment could satisfy the condition of non-availment of credit under the exemption Notification No. 15/94-CE dated 1.3.1994 involved in the said case allowed exemption from Central Excise duty on condition that no Modvat credit was availed on the inputs used in manufacturing of the final products. Considering various decisions of the Appellate Tribunal including the above referred decision....
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....ailed for inputs utilized in manufacture of the exempted final products. Thus, in this landmark decision of the Appellate Tribunal, the exemption was allowed for coaches supplied to the Railways even though the appellant had taken credit of duties paid on the inputs on the condition that the appellant would reverse the credit pursuant to the direction of the Appellate Tribunal given while deciding the appeal finally. 5.9 A similar controversy came up before the Appellate Tribunal, Ahmedabad, in case of Maize Products and in the decision of the Appellate Tribunal, Ahmedabad, reported in 2007 (79) RLT 662, the Appellate Tribunal held that the demand on the basis of 8%/10% of the value of the exempted final products was not valid even if the assessee had taken Cenvat credit of duties paid on the inputs used in relation to manufacture of the exempted products because the assessee could reverse the amount of Cenvat credit even at a later stage. The assessee in that case was allowed to reverse amount of Cenvat credit within 4 weeks from the date of receiving communication from the Department as regards any short-fall in reversal. 5.10 The Revenue however, approached the Hon'ble Gujarat....
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....ttributable to input services used in respect of trading business. However, the appellant has paid back such proportionate Cenvat credit and therefore, the Adjudicating Authority has no authority in law to demand a substantially higher amount from the appellant by suggesting that payment was required to be made by the appellant at the rate of 6% of the trading business. The value of trading business is also incorrectly and erroneously arrived at by the Adjudicating Authority, and therefore also there is no justification in the demand of cenvat credit 5.15 The appellant has calculated the aggregate amount of cenvat credit in respect of input services used in relation to trading business for the entire period from April 2011 to March 2016. The value of trading is derived in accordance with the method prescribed under Clause-(c) of Explanation-I under Rule-6(3D) of the Cenvat Credit Rules. The term "value" is explained under this provision in case of trading as the difference between the sale price and the cost of goods sold (determined as per the generally accepted accounting principles without including the expenses incurred towards their purchase) or 10% of the cost of goods sold,....
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....s & Special Economic Zone Limited - 2015 (39) STR 726 (Guj.) In the above decisions the credit on Cement and Steel was allowed which were used for construction of premises of output service provider. Considering the above settled legal position, we are of the view that the appellant are entitled for Cenvat credit availed on Cement and steel used for construction of their show rooms where from the output service of authorized service station has been provided 5.20 As regard the denial of credit of Rs. 16,85,532/-out of Rs. 78,41,493/- the reason for denial is that this credit pertains to other premises i.e. Naroda, Himatnagar, Gandhidham which were not registered. However, it is observed that even though these premises were not registered but the output service provided for these services were admittedly suffered Service Tax payment. Therefore, merely because the premises are not registered the Cenvat credit cannot be denied on this ground, when the output service was provided on payment of Service Tax. This issue has been considered in the case of Manipal Advertising Services Pvt. Limited vs. CCE, Mangalore - 2010 (19) STR 506 (Tri. Bang.), wherein the Tribunal has considered the....