TaxTMI 
TaxTMI 
2024 (4) TMI 724
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....ur the warranty claims during the warranty period to the overseas customers. The appellant reimburses various expenses, like Export warranty, Product recall charges and Goodwill warranty, incurred by the distributors in view of the Agreements. Revenue initiated proceedings against the Appellant for the Relevant Period demanding Service Tax under Business Auxiliary Services ('BAS") on account of the expenses reimbursed to the foreign distributors under reverse charge mechanism; Accordingly, Show Cause Notices, dated 08.06.2009 (for the period 18.04.2006-2008), 30.09.2009 (for the period 2008-09) and 30.07.2010 (for 2009-10); Adjudicating Authority passed the Impugned Order-in-Original, No. 74-76/RDN/2010 dated 11.01.2011, confirming the demand of Service Tax of Rs. 5,74,43,722/-, along with interest and penalties under Sections 77 and 78 of the Finance Act,1994, by invoking the extended period of limitation and holding that the services rendered by the foreign distributors qualify as Business Auxiliary Service under sub section (i), (ii) and (iii) of Section 65(19) of the Finance Act, 1994 ('the Act') and the same were rendered on behalf of the Appellant. Hence, this app....
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....parent from the terms of the Article 5 of the Agreement; the overseas distributors are engaged in trading activity ie., buying goods from the Appellant and selling it to the customers in open market and act as sales dealer of the Appellant as per Article 12(b) of the Agreement; thus, the services rendered by the foreign distributors/ dealers etc. cannot be said to be in nature of promotion or marketing of goods of the Appellant and hence not covered by sub-clause (1) of the definition of BAS. He relies on • M/S. Rohan Motors Limited Vs CCE, Dehradun 1997 (91) ELT 540; • Philips India Ltd. Vs CCE, Pune 2020 (12) TMI 1014- CESTAT New Delhi • Mahindra & Mahindra Ltd. Vs CCE, Bombay 1998 (103) ELT 606 (Tribunal) (affirmed by Supreme Court in 1999 (111) ELT A126 (SC)] • CCE, Mysore Versus TVS Motors Co. Ltd 2016 (331) ELT 3 (SC.) 3.1. Learned Counsel for the appellants submits also that clause (ii) under 'BAS' covers promotion or marketing of service provided by the client; it is not applicable in the instant case as the Appellant does not qualify as client of the foreign dealer/ distributors; the Appellant is not providing any serv....
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....ter sale services including maintenance and repairs of the products manufactured by the Appellant during the warranty period; the activities undertaken by the overseas distributors/ dealers are more specifically covered under the definition of authorised service station services; Board Circular No. B11/1/2001-TRU, dated 9-7-2001 states that any service or repair provided by an Authorized Service Station in relation to motor cars and two-wheeled motor would be covered under the ambit of Service Tax; Circulars No. 96/7/2007-ST dated 23.08.2007 and No. 87/05/2006- ST dated 06.11.2006 reiterate the same; the examples of services would include services provided under warranty period, subsequent services such as routine check of engine, vehicle, engine oil check, gas oil check, wheel alignment, etc., or any repair undertaken as such. He submits that without prejudice the above, since the services provided by the foreign distributors are more specifically covered under authorised service station, the demand cannot be confirmed under a general category i.e., under business auxiliary service. He relies on the following cases: • M/s. Uttam Toyota Vs CCE & ST, Ghaziabad, ST/1094/....
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....ST, LTU, Chenai 2019 (29) G.S.T.L. 452 (Tri. - Chennai) (Affirmed by Supreme Court in 2020 (32) GSTL J154 8. Learned Counsel for the appellants submits that when no service tax is payable, question for payment of interest under Section 75 of the Act and penalty under Section 77 and 78 does not arise; penalty under Section 78 cannot be imposed; the department was aware about the activities of the Appellant at the time of issuing SCN for the period 2004-05 to 2007- 08; extended period cannot be invoked for subsequent period as there was no suppression on part of the Appellant. He relies on Nizam Sugar Factory Vs CCE, AP 2006 (197) ELT 465 (SC). 9. Shri Nikhil Kumar Singh, assisted by Shri Narinder Sigh and Shri Yashpal Singh, Learned Authorised Representatives for the Revenue, reiterates the findings of the impugned order. He submits that the argument of the appellants on the ground that the notice did not specify the sub clause of 'BAS' and reliance on the tribunal in the case of ITC Ltd- 2014(33) STR 67 (Tri-Del) is not correct as Hon'ble High Court of Delhi, on an appeal filed by the department, vide order dated 23.07.2014 (2014(36) STR.481), held that the object and purpose....
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....s under BAS: the distributors of the appellant located abroad are not providing services of service, repair etc. of motor vehicles to the appellant; they are doing this activity of repair & service of motor vehicle to the customers who had purchased those vehicles in that country; these distributors are Authorized service stations for those customers who purchase the vehicles for them; as the ownership of the vehicles get transferred to those customers after the purchase of vehicles and it cannot be in any way construed that the services of repair/service of motor vehicle is being done by the distributors for the appellants. 12. Learned Authorised Representative takes us through different agreements and submits that no cognizance of this agreement dated 01.10.2003 can be taken as the appellant is not a party to this agreement; it is also not on record whether the appellant has paid any amount in reference to this agreement; this agreement at best, be considered to know the activities carried out by the distributors for Maruti Suzuki Ltd. He submits that as regards Distributorship agreement dated 01.01.2009, between Maruti Suzuki, India Ltd, New Delhi and CMC motors groups Ltd., ....
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....twork of Authorized Repairers. 14. Learned Authorised Representative submits that the Overseas Distributors are responsible for handling the warranty claims, monitoring of repair and maintenance services and the establishment of an entire network of Authorized Repairers for the appellant products; the appellant sells the cars to the Overseas Distributors who in turn sell it to the ultimate consumers; the appellant being the manufacturer is liable to oblige the warranty claim for which the amount is paid to Overseas Distributors who provide the repair services on behalf of the appellant; liability to pay Service Tax is cast upon the appellant under reverse charge mechanism, as provided in Section 66A of the Finance Act, 1994 under Business Auxiliary Services; the Overseas Distributors are mandated to promote and market the sale of cars and such sales promotion and marketing is also an activity that falls within the definition of Business Auxiliary Service; though the Overseas Distributors may have carried out the repair and maintenance services and established the network of Authorized Repairers for the benefit of the manufacturer; the adjudicating authority has clearly observed ....
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....epresentative submits on the appellant's submission that the Cost of material and goods not be included in the taxable Service and Reimbursable expenses cannot be subject to levy of service tax that Notification no. 12/2003-ST dated 20.06.2003 provides exemption to the value of goods and materials sold by the service provider to the service recipient, with the condition that there is documentary proof indicating the value of the said goods and materials; as per the ratio of Tribunal held in the case of Ador Fontech Ltd. - 2014(36)STR; Mahendra Engineering Limited 2015 (38) STR 233 (All.). 146(Tri-Mumbai) and Tanya Automobiles (P) Ltd. vs. CCE - 2016(43) STR. 155 (Tri. -All), the exemption is available only when goods are sold during the course of the provision of service; there is documentary evidence in relation to the sale of said goods and if the appellant have not availed Cenvat credit on the said goods/ materials. He submits that the case of Hon'ble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd 2013 (29) STR 9 (Del.), is not applicable to the facts of the instant case as the same are totally different; the instant case which governe....
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.... 65(9) and Section 65(105)(zo) of Finance Act, 1994; the order did not consider CBEC Circulars dated 09th July 2001, 23rd August 2007 and Hon'ble Apex Court's decision in the cases of TVS Motors and Philips India (both supra). Learned Counsel submits that Hon'ble Supreme Court held in the cases of Babu Prasad Kaikadi- 2004 (1) SCC 681 and Government of West Bengal Vs Tarun K. Roy & Others - 2004 (1) SCC 347 that judgments which are rendered per incuriam statutory provisions are binding Higher Courts' judgments or binding judgments of co-ordinate benches have no precedential value and hence to be ignored. Larger Bench of the Tribunal in the case of Urison Cosmetics Ltd. - 2006 (198) ELT 508 (Tri. LB) held that Hon'ble Madras High Court judgment in identical circumstances was per incuriam; Hon'ble Apex Court affirmed this decision in the case of Kraftech Products- 2008 (22) ELT 504 (SC). 19. Heard both sides and perused the records of the case. Learned Authorized Representatives for the Department raises a preliminary objection that there were three show-cause notices involved in the case and they were adjudicated by the Commissioner of Service Tax, New Delhi vide three Orders-in-....
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....numbers are given to a composite adjudication order, passed in respect of a several show cause notices, and against such adjudication order appeals are preferred to the Commissioner (Appeals), in such circumstances, as many appeals must be filed before this Tribunal as the number of orders-in-original to which the case relates, in so far as the appellant is concerned. This is a consequence of Explanation (1) to Rule 6A. 7. In the present matters, in respect of which this reference is preferred to the Bench, the subject matter of the challenge in each of the appeals is to a composite order-in-original bearing distinct numbers pertaining to multiple show cause notices. In the circumstances it is Rule 6A and not Explanation (1) that applies. As a consequence, one appeal against each of the impugned orders-in-original, even though distinct numbers are provided by the adjudicating authority to each of the composite orders, would suffice. 19.3. On going through the Rule 6A and the decision as above, we find that as per the procedure so many appeals need to be filed as there are Orders-in-Original. In the instant case, though there are three showcause notices, they have been d....
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....ilable even though under a different provision is by itself not sufficient to invalidate the exercise of that power. We find that the show-cause notice was issued alleging that the appellants have not paid the service tax for the various services received by them from their overseas dealers/ distributors and that such services fall under "Business Auxiliary Service". We find that the show-cause notice mentions at Para 7 that the appellants are incurred an expense on account of advertisement for sale promotion which appear to be covered under BAS. Thus, it is seen that in the instant case, the purport of the show-cause notice is to put the appellants on notice that they have received services from their foreign dealers and have not discharged due service tax under the BAS. Though, the specific sub-clauses have not been enumerated, the intent of the notice has been made clear and therefore, in view of the judgment of the Hon'ble High Court cited above, we find that the proceedings are not vitiated. In view of the same, we find that judgments cited by the appellant are not applicable in the particular facts of the case. 21. Now, we turn our attention to the main issue involved in t....
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.... understood that the dealer/ distributor is performing his work on behalf of or as an agent of the manufacturer in this case, the appellants. Similarly, in advertising, promotion of good-will, overseeing the network of dealers/ distributors, business interest of the manufacturer of the motors is taken care even though the activity aids for his own business promotion. Therefore, we are not in agreement with the submission of the learned Counsel for the appellant that the relationship between the appellant and the overseas dealers is on a principal-to-principal basis. As long as the overseas dealers/ distributors are rendering some service on behalf of/ on account of/ in connection with the business of the appellant, they take the role of the manufacturer/ appellant. The overseas dealer/ distributor is receiving a consideration for this purpose. Therefore, we find that there is a force in the argument of the Department that the services rendered are in the nature of BAS. 22.1. We find that Chennai Bench of the Tribunal has gone into an identical issue concerning a similarly placed manufacturer of motor cars, i.e Hyundai Motors India Pvt. Ltd. (supra), having similar arrangements w....
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....ent, in whatever form or by whatever name called, whether or not conducted online, including lottery, lotto, bingo; (iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client; (v) 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, but does not include any activity that amounts to "manufacture" within the meaning of clause (f) of Section 2 of the Centrai Excise Act, 1944 (1 of 1944). .......". 7.2 In the show ....
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....ce', and would be taxable. 23. In view of the above, we have no hesitation whatsoever, to conclude that the services rendered by the overseas dealers/ distributors are services categorized under BAS and thus, the appellants are required to pay service tax on Reverse Charge basis. Learned Counsel for the appellants has relied upon some cases as stated above to conclude that the relationship between them and the overseas distributors/ dealers is not that of a client and principal but was on principal-to-principal basis. We have gone through the cases and find that the cases are not applicable as the facts are not comparable. As submitted by the learned Authorized Representative for the Department, they are on the issues which are different from those discussed in the instant case. For the same reason, we find that the contention of the learned Counsel for the appellants that the decision of the Chennai Bench of the Tribunal in the case of Hyundai Motors (supra) be considered as per incuriam, is not acceptable. We find that as the case of Hyundai Motors is squarely applicable with the facts of the case, there is no need to refer to the cases cited by the appellants in this regard a....