TaxTMI 
TaxTMI 
2024 (2) TMI 819
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....ect of Chennai Operations from M/s.Jubilant Motor Works Pvt. Ltd. from December 2015 onwards with all assets and liabilities in respect of Chennai Operations. 1.2. Intelligence gathered by the Officers of Directorate General of Central Excise Intelligence, Bangalore Zonal Unit indicated that, appellant, M/s. Jubilant Motor Works (South) Pvt. Ltd. is evading payment of service tax, as it appeared from the ST 3 returns filed with the department, that appellant has not declared their entire service income as accounted in their books of accounts. 1.3. Further, it appeared that appellant was availing input service tax credit in respect of services which are used by them in their show room and their service centre. These show rooms and service centres are engaged in the activity of trading in cars / spares / accessories as well as providing taxable service. Thus, it appeared that appellant was availing ineligible CENVAT credit on certain common input services used for taxable services and trading and utilizing the same towards payment of their service tax liability. 1.4. Based on the said intelligence, investigations were initiated and relevant documents / records were resumed u....
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....ing AUDI brand cars through marketing and advertising, * Incentive Income (quarterly) - for promoting AUDI brand cars, * Incentive Income (retail standards) - for promoting AUDI brands by meeting the service standards of the brand at showroom and service centre, * Incentive Income (Service target) - for promoting AUDI brands by meeting the service standards of the brand at service centre, * Incentive Ambition plan - for promoting AUDI brands by meeting the service standards of the brand at show room, * Incentive Income monthly - for promoting AUDI brand cars * Incentive from VW - others - for various other activities, * Incentive AUDI genuine accessories (included in incentive income (service target) - for promoting the genuine accessories of AUDI brand to the customers, * Incentive Income AUDI genuine parts (included in incentive income (service target) for promoting the genuine parts of AUDI brand to the customers for, * Incentive SFAI - for generating market for AUDI brand of cars through customer enquiry and follow up for convincing the prospective customers to buy the cars. 1.6. It was noted th....
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.... under the taxable category of business auxiliary services for the period up to 30.6.2012. iii. With effect from 1/7/2012, as per definition of service "under Section 65 B 44 and taxable service as per Section 65 B 51 of the Finance Act 1994. 1.10 Further, the transport of goods by road services, sponsorship services, legal services, supply of manpower for any purpose or security services, works contract services received by appellant are covered under the reverse charge mechanism as per section 68 (2) of the Finance Act 1994 read with Rule 2 (1) (d) (i) of service tax rules 1994 read with notification No.30/2012- ST dated 20.6.2012 as amended. Show Cause Notice no.66/2016-17 dated 18.10.2016 was issued to the appellant proposing to demand the service tax for the period from 4/2011 to 3/2016 and also proposing to recover the amount being 7/6/5 percentage of the value of the exempted services provided by them during the period from 4/2011 to 3/2016 for ineligible credit availed in respect of exempted service. The Show Cause notice proposed to demand interest and also for imposing penalties. After due process of law, the original authority passed the following order. ....
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....r Works (South) Pvt Ltd, D-6, South Phase, Ambattur Industrial Estate, Ambattur, Chennai- 600058. 2. The Ld. counsel Shri Raghavan Ramabhadran appeared and argued the matter. The submissions are as under: i. The Appellant is a private limited Company engaged in the sale of AUDI brand cars, purchased from Volkswagen on principal-to-principal basis for sale to various customers. ii. The Appellant's Company was incorporated on 03.11.2015 and the Appellant took over all business activities with respect to Chennai operations of M/s Jubilant Motor Works Pvt. Ltd. (hereinafter referred to as "JMWPL") with effect from 21.12.2015, vide Business Transfer Agreement dated 18.12.2015. iii. Prior to the transfer of business to the Appellant, the Chennai operations of JMWPL (i.e., sale and service of AUDI brand cars purchased from Volkswagen) were carried on by JMWPL Company. JMWPL continues to exist till date. iv. Show Cause Notice No. 66/2016-17 dated 18.10.2016 was issued to the Appellant alleging demand of service tax on various incentive income and reversal of input tax credit for the period April 2011 to March 2016. Therefore, the demand pertaining to ....
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....stomers cancelled their bookings. In those cases, the Appellant retained a portion of the advance deposited by the customers as liquidated damages and booked the same in its financials as 'forfeiture income'. The service tax amount of INR 10,27,645/- and interest of INR 4,40,041/- under this demand has been paid under protest at the stage of audit. xii. For the period both prior to 01.07.2012 and period form 01.07.2012, there is no specific allegation in the SCN demanding service tax on the forfeiture income. xiii. For the period prior to 01.07.2012, no finding is given by the Impugned Order. xiv. For the period from 01.07.2012, the Impugned Order states that the forfeiture income would have to be considered as a declared service falling under 66E(e) of the Act, as it amounts to agreeing to tolerate an act or a situation. xv. The Appellant owns a showroom of AUDI brand cars. The Appellant also owns an authorised service centre for providing repair and maintenance service and authorised service station services to its customers. xvi. Further, the Appellant availed Cenvat credit of various input services, including certain common input ser....
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....d, reliance is placed on the decision of the Hon'ble jurisdictional Madras High Court in Deputy Commissioner of Service Tax, Chennai v. Service Care Pvt. Ltd, 2019 (365) E.L.T. 225 (Mad.), wherein in the context of Section 73(1) of the Act, it was held that the words 'person chargeable' and the words 'the person to whom such tax refund has erroneously been made', means the actual assessee, on whom, after issuance of show cause notice, assessment is made, would be the person liable to pay the amount of service tax. So, notice seeking to show cause should be issued under Section 73 only to the person chargeable. This decision was relied on by the Hon'ble Tribunal in JayaswalNeco Industries Ltd. v. Commissioner of Custom Central Excise & Service Tax, Raipur 2021 (47) GSTL 370 (Tri.- Del.). A.3 The Appellant submits that for the period prior to the Business Transfer Agreement, tax can be demanded only from JMWPL and not the Appellant. Hence, the demand of service tax for the period up to 20th December 2015 is liable to be set aside on this count. A.4 Further, it is submitted that the SCN did not invoke any provision for demand on the Appellant for a period that is pri....
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....to Section 87(c) of the Act has been inserted prospectively with effect from 06.08.2014. Therefore, the entire demand prior to 06.08.2014 as per SCN is liable to be set aside for lack of authority under law. In this regard, reliance is placed on the decision of the Supreme Court in Rana Girders Ltd. v. Union of India 2013 (295) ELT 12 (SC) wherein in Para 21 of the said decision it has been held that Proviso to Section 11[parimateria to proviso to Section 87(c) of the Act] which was added by way of Amendment only w.e.f. 10.09.2004 is not applicable to the period prior to 10.09.2004. A.9 Without prejudice, it is submitted that even if there was an agreement between the Appellant and JMWPL to the effect of taking over the liabilities of Chennai operations, such agreement cannot be relied upon by the Department to shift the service tax liability, if any, from JMWPL to the Appellant. In other words, a private agreement between the parties cannot have the effect of altering the statutory liability cast upon one of them. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in Deputy Commercial Tax Officer v. Sha SukrajPeerajee [1968 (21) STC 5], wherein....
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....in relation to the sale and purchase of goods. The same does not fall within the scope of the definition of service. C.1 The Appellant submits that trade discounts are a pre-sale occurrence, the quantification whereof depends on many factors. In this regard reliance is placed on Para 27 of the decision of the Hon'ble Supreme Court in Southern Motors v. State of Karnataka, 2017 (358) E.L.T. 3 (S.C.). C.2 The Appellant submits that the core issue stands settled in favour of the Appellant where the courts have consistently held that demand of Service Tax on the discounts and incentives received by the dealers from the manufacturer is not liable to Service Tax. In this regard, reliance is placed on the decision of Hon'ble Tribunal in CST, Mumbai-I v. Sai Service Station Ltd. - 2014 (35) S.T.R. 625 (Tri-Mumbai) wherein the Hon'ble CESTAT has held that demand of service tax raised on sale/target incentive on sale of vehicles and incentive on sale of spare parts does not amount to promotion and marketing of products and demand under BAS is not sustainable. The Hon'ble Tribunal held that these incentives are in the form of a trade discount. This principle has been followe....
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....rtment has not classified any of the services on which it seeks levy Service Tax on the Appellant. The SCN is vague and does not specify any classification of the services rendered by the Appellant. D.2. The Appellant submits that it is a settled position SCN must specify the exact sub- heading/classification under which the Service falls for proposing a demand of Service Tax. When the SCN is bereft of clarity and does not convey the exact nature of service rendered, such SCN is vague and the proceedings must fail on this ground itself. D.3. In this regard, reliance is placed upon the Judgements of this Hon'ble Tribunal in CCE &ST, Pondicherry vs A.M Manickam and Others 2017(6) TMI 57-CESTAT Chennai and CCE, Pondicherry vs R Sundaramurthy& Co 2019 (5) TMI 228-CESTAT Chennai. Further, reliance is placed upon the following decisions as well wherein SCNs which were vague in their allegation regarding classification of service was set aside. a) United Telecoms Limited vs CST, Hyderabad 2011 (22) S.T.R. 571 (Tri.- Bang) b) Vatsal Resources Private Limited vs CST, Surat-I 2023 (68) G.S.T.L. 279 (Tri.-Ahmd.) D.4. Consequently, the entire demand....
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....96/7/2007-ST, dated 23.08.2007, Circular issued under F. No. 137/25/2011-ST, dated 03.08.2011, wherein it has been uniformly held that no Service Tax can be charged on an amount received in the nature of penal charges. F.5 With respect to the period from 01.07.2012, the Appellant submits that the forfeiture of income does not qualify as consideration for any service provided by the Appellant to the customers. In this regard, reliance is placed on the decision of the Larger Bench Hon'ble Tribunal in Commissioner of Service Tax, Chennai v. M/s Repco Home Finance Ltd 2020-VIL-309- CESTAT-CHE-ST, wherein it was observed that that there is marked distinction between "conditions to a contract" and "considerations for the contract" and held that the foreclosure charges, therefore, are not a consideration for performance of lending services but are imposed as a condition of the contract to compensate for the loss of "expectations interest" when the loan agreement is terminated pre-maturely. F.6 It is a well settled principle that liquidated damages and charges in the nature of penalty is not chargeable to service tax. This settled principle has been adopted in the followi....
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....t the Appellant has not maintained separate accounts for the receipt and use of input services used commonly for providing taxable and exempted service as mandated under Rule 6 of the Credit Rules and that therefore, the Appellant is liable to pay the amount as per Rule 6(3)(i) of the CENVAT Credit Rules. G.3 It is submitted that an assessee receiving common inputs/ inputs services used in taxable as well as exempted activities, is free to opt for method given under Rule 6(2) and 6(3) of the CCR. There is no bar in the CCR which restricts an assessee or mandates him to opt for one option over the other. [Rule 6 (3) (i) over Rule 6 (3) (ii)]. G.4 The Appellant submits that with respect to the procedural condition regarding prior intimation in writing, the issue stands settled in favour of the Appellant. In this regard, reliance is placed on the following decisions, a. Mercedes Benz India (P) Ltd. V. Commissioner Of C. Ex., Pune-I 2015 (40) S.T.R. 381 (Tri. - Mumbai) b. Reliance Life Insurance Co. Ltd v. Commissioner of ST, Mumbai 2018 (363) ELT 1050 (Tri-Mum) c. Saravana Stocks Pvt. Ltd. V Commr. Of Gst& C. Ex., Chennai 2021 (52) G.S.T.L.....
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....tial relief. 3.1. The Ld. AR Shri Rudra Pratap Singh appeared and argued for the department. In regard to the first contention of appellant that, appellant company has been established only with effect from 21/12/2015 and therefore not liable to pay service tax prior to this period, the Ld. AR adverted to the statements recorded from Shri Manish Pahuja and Shri Amritharaj V. It is submitted by Ld. AR that Shri Manish Pahuja had clearly admitted that he is the person responsible and looking after the operations of M/s. Jubilant Motor Works Pvt. Ltd. (JMWPL) as well as the appellant Company. It is also admitted by him that he is responsible for the lapse of non- payment of service tax. It is submitted that the appellant had taken over the business of M/s. Jubilant Motor Works Pvt. Ltd. as a going concern and therefore, the appellant is liable to pay the service tax for the period prior to 2015 also. 3.2. In his statement, Shri Amritraj has given the details of incentives received from M/s. Volkswagen Group Sales India Pvt. Ltd. So also the incentives received from Castrol India was admitted to be received for promoting and selling the Castrol brand of oils. These incentives wer....
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....motion of castrol products. The confirmation of demand of service tax under Business Auxiliary Services is correct and proper. 3.6. The appellant also earned income as 'car advance money forfeited'. When a customer books a car, certain amount is collected from him as advance, towards booking. Subsequently, if the customer cancels the booking, the advance amount given by the customer is forfeited against the cancellation. It is submitted that the details of forfeited advance would show huge amounts. The appellant is liable to discharge service tax on these amounts. 3.7. In regard to the demand raised on the ground that the appellant has availed CENVAT credit on common input services used for exempted service (trading) and taxable services, the Ld. AR submitted that the appellant had not maintained separate accounts as required under Rule 6 (3) of CENVAT Credit Rules 2004. Further, they did not intimate the department that they intend to reverse the proportionate credit attributable to trading as per Rule 6 (3 A) (ii). Therefore, the appellants have to pay an amount of 5%, / 6% / 7% of the value of exempted goods (trading turnover) and the confirmation of this demand requires n....
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....e client; or 21 [Explanation-For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, 'inputs" means all goods or services method for use by the client;] v. 22 [production or processing of goods for, or on behalf of, the client;] vi. provision of service on behalf of the client; or vii. a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision,and includes services as a commission agent, 23 [but does not include any activity that amounts to manufacture of excisable goods.] 24 [Explanation --- For the removal of doubts, it is hereby declared that for the purposes of this clause,--- 6.2 For the period after 1/7/2012, the issues has to be considered as per definition of service as under Section 65 (B) 44. The definition of 'service' reads as under: (44) "service" means any activity carried out by a person for another for consideratio....
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....n as the appellant is interested to do more sales for their own benefit of making more profit. It cannot be said that they promote the sales of M/s. Volkswagen or M/s. Castrol India Ltd. The incentives depend on the targets achieved which the appellant is interested to achieve as they would earn more profit. Even if there was no such incentive the appellant would be attentive and focused to sell cars to their maximum possible. The incentive is not in the nature of any consideration for providing services to M/s. Volkswagen and M/s. Castrol India Ltd. 6.4. The Tribunal in the case of M/s. S.K. Cars India (P) Ltd. Vs. Commission of GST and CE, Sale, 2023-VIL-488 CESTAT, Chennai-ST had occasion to consider a similar issue. It was held that the incentive / discount are in regard to sales transaction and cannot be subject to service tax. "7. The first issue is in regard to the demand of service tax on the incentives received by the appellant from the manufacturer for sale of cars. The definition of Business Auxiliary Services under Section 65 (19) of the Act ibid is reproduced as under: "Business Auxiliary Services" means:- any service in relation to- (i) P....
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....ership agreement dated January 1, 2013 entered into between Maruti Suzuki India Ltd. and the appellant. Under the said agreement, the appellant receives discount form MUL, which are referred to as "incentives" under the scheme. The Department has sought to levy service tax on the incentives received by the appellant under the category of "business auxiliary service" [BAS]. .... ..... 10. As noticed above, the appellant purchases vehicles form MUL. and sells the same to the buyers. It is clear from the agreement that the appellant works on a principal to principal basis and not as an agent of MUL. This is for the reason that the agreement itself provides that the appellant has to undertake certain sales promotion activities as well. The carrying out of such activities by the appellant is for the mutual benefit of the business of the appellant as well as the business of MUL. The amount of incentives received on such account cannot, therefore, be treated as consideration for any service. The incentives received by the appellant cannot, therefore, leviable to service tax. 12. The Tribunal placed reliance on an earlier decision of the Tribunal in Tyot....
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....after placing reliance upon the decision of the Tribunal in Sai Service Station Ltd., observed as follows: "I also find that the ratio of the aforesaid case of CCE, Mumbai-I Vs. Sai Service Station is squarely applicable to the facts of the present case and hold that no service tax can be demanded on the incentive which was in form of trade discounts, extended to the party in terms of a declared policy for achieving sales target. Accordingly, I find that the demand of service tax raised on this count is unsustainable. Thus demand of interest under section 75 of the Act is also no sustainable." 15. The Department, in the present cannot be permitted to take a different view. The service tax on the amount received from incentives could not, therefore, have been levied to service tax." 9. The Tribunal in the case of BM Autolink Vs Commissioner of Central Excise, Kutch (Supra) has taken similar view and set aside the demand of service tax on the incentives received for sale of cars. "4. We have carefully considered the submissions made by both the sides and perused the records. We find that the fact is not under dispute that the appellant being a deal....
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....ol cannot sustain and requires to be set aside. Ordered accordingly. 7. The next issue is with regard to the demand confirmed on amount of advance forfeited at the time of cancellation of booking of car. In the case of Lemon Tree Hotel Vs. Commissioner, GST CE & Customs, Indore 2020 (34) GSTL 220 (Tri-Delhi) a similar question was considered wherein the demand of service tax was raised by department on the amount retained on cancellation of advance booking made for accommodation in hotel. It was held that such amount is not liable to levy of service tax under Section 66 E (C) of Finance Act 1994 or under Section 65 (105) (zzz-w) of Finance Act 1994. The relevant paras read as under: "3. So far as the first issue is concerned, the appellant , in the course of their business of running a hotel, offers advance booking to its customers, on payment of rent or deposit. Sometimes in the event of cancellation or of no show i.e. if the guest does not come for stay, the appellants retains the full or part of the amount towards cancellation charges. It is admitted that the appellant have paid service tax under Accommodation Services as and when they receive advance, availing the p....
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....he Act ibid, and consequently, whether the appellant would be liable to Service Tax on the same in terms of Section 668 ibid.? 6.1 The Learned Advocate for the appellant would submit, at the outset, that the issue involved in the case on hand is no more res integra as the same has been settled by the orders of various Benches of the CESTAT, namely - (i) South Eastern Coalfields Ltd. v Commissioner of Central Excise and Service Tax, Raipur [2020 (12) TM1 912 CESTAT, New Delhi 2020-VIL- 559-CESTAT-DEL-ST); (ii) M.P. PoorvaKshetra Vidyut Vitran Co. Ltd. v. Principal Commr., CGST &C.Ex., Bhopal [2021 (46) G.S.T.L. 409 (Tri. Delhi) - 2021-VIL-30 CESTAT-DEL-ST); (iii) Neyveli Lignite Corporation Ltd. v. Commissioner of Cus., C. Ex. & S.T., Chennai [2021 (53) G.S.T.L. 401 (Tri. Chennai) - 2021-VIL-338-CESTAL CHE-ST); (iv) Steel Authority of India Ltd. v. Commissioner of G.S.T. & Central Excise, Salem [2021 (7) TMI 1092 - CESTAT, Chennai - 2021-VIL-326- CESTAT CHE-ST) (v) MNH Shakti Ltd. v. Commissioner, C.G.S.T. &C.Ex., Rourkela (2021 (11) TMI 427- CESTAT, Kolkata - 2021-VIL-600-CESTAT-KOL-SI]: (vi) K.N Food Industries Pvt. Lt....
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....appellant is carrying on any activity to receive compensation nor can there be any intention of the other party to breach or violate the contract and suffer a loss. The purpose of imposing compensation or penalty is to ensure that the defaulting act is not undertaken or repeated and the same cannot be said to be towards toleration of the defaulting party. The expectation of the appellant is that the other party complies with the terms of the contract and a penalty is imposed only if there is non-compliance. 30. The activities, therefore, that are contemplated under section 66E (e), when one party agrees to refrain from an act, or to tolerate an act or a situation, or to do an act, are activities where the agreement specifically refers to such an activity and there is a flow of consideration for this activity. 40. It is in this context and in the context of section 74 of the Contract Act, that the Supreme Court observed: 20. Section 74 declares the law as to liability upon breach of contract where compensation is by agreement of parties pre- determined, or where there is a stipulation by way of penalty. But the application of the enactment is not restricte....
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....xempted services (trading) as they failed to maintain separate accounts of common inputs availed for taxable services and exempted services. The Ld. counsel for appellant has submitted that appellant has reversed the proportionate credit attributable to trading. The details are also furnished. The department has raised the present demand on this ground for the reason such reversal of proportionate credit as under Rule 6 (3) (ii) cannot be accepted as the appellant has not given prior intimation to the department that they intend to adopt the method of reversal of proportionate credit as under Rule 6 (3) (ii). The issue as to whether the assessee is required to follow only Rule 6 (3) (i) on failure to intimate the department as to the option to reverse proportionate credit is no longer res-integra. It has been held in various decisions that the requirement for giving an intimation is only procedural in nature and the department cannot deny to an assessee the option available under Rule 6 (3) (ii) only because they did not comply with the procedure of prior intimation. 8.2. The Tribunal in the case of Mercedes Benz India Pvt. Ltd. Vs CCE, Pune 2015 (40) STR 381 (Tri-Mum) held as u....
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.... our view, three options have been provided under sub-rule 6(3), and it is up to the assessee that which option has to be availed. Revenue could not insist the appellant to avail a particular option. In the present case the appellant have admittedly availed option as provided under Rule 6(3)(ii) and paid an amount as required under sub-rule (3A) of Rule 6. As regard the compliance of the procedure and conditions as laid down for availing option as provided under sub-rule (3) (ii), we find that foremost condition is that the appellant is required to pay an amount as per the formula provided under sub-rule (3A) on monthly basis. However, we find that as per the provision, payment on monthly basis is provisional basis, therefore it is not mandatory that whole amount or part of the amount was required to be paid on every month. The appellant though belatedly calculated the amount required to be paid in terms provided under sub-rule (3A) of Rule 6, therefore to fulfill the condition, assessee should pay the said amount, which has been complied by the appellant. 5.2 As regard the delay in payment, if any, the appellant have discharged the interest liability on such delay. Regard....
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.... shall be compulsorily made applicable, therefore we are of the view that Revenue could not insist the appellant to avail a particular option. In the present case admittedly it is appellant who have on their own opted for option provided under Rule 6 (3) (iii). The meaning of the option as argued by the Ld. Sr. Counsel is that "option of right of choosing, something that may be or is chosen, choice, the act of choosing". From the said meaning of the term 'option', it is clear that it is the appellant who have liberty to decide which option to be exercises and not the Revenue to decide the same. 5.4. We find that the appelant admittedly paid an amount of Rs 4,06 785/ plus interest, this is not under dispute. Therefore in our view, the appellant have complied with the condition prescribed under Rule 6(3)(ii) read with sub-rule (3A) of Rule 6 of Cenvat Credit Rules, therefore demand of huge amount of Rs 24,71,93,529 of the total value of the vehicle amounting to Rs.494,38,70,5777 sold in the market cannot be demanded. We are also of the view that Rule 6 of the Cenvat Credit Rules is not enacted to extract illegal amount from the assessee. The main objective of Rule 6 is to en....
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....ent case, there is no case of noncompliance of procedure and condition. Therefore, the judgments cited by the Ld. A.R. are not applicable. 6.1. In view of these observations, we are of the considered view that demand confirmed by the adjudicating authority has no legs and therefore the same cannot be sustained. The impugned order is set aside and Appeal is allowed. 8.3. Similar view was taken in the case of M/s. Cranes and Structural Engineers Vs. CCE 2016 (8) TMI 387 - CESTAT, Bangalore. Relevant para is as below: 4.1 On analysis of Rule 6(3A), I find that while exercising the option, the manufacturer of goods or the provider of output service shall intimate in writing to the Department regarding the option exercised. In the present case admittedly there is no intimation given by the appellant informing the exercise of his option. The argument of the Department is that when the appellant has not intimated his option in writing then the appellant is bound to pay the duty amount calculating under the first option. According to me, this argument is devoid of merit, because the said Rule does not say anywhere that on failure to intimate, the manufacturer/service p....