Custom, Excise & Service Tax Tribunal
M/S Em Pee Motors Ltd vs Cce, Chandgiarh on 3 August, 2011
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
Court No.III
ST/Appeal No.665/2007
(Arising out of order in appeal No. 297/CE/CHD/07 dated 8.8.07 passed by the Commissioner of Customs & Central Excise, Chandigarh)
Date of Hearing:3.8.2011
Date of pronouncement:
For Approval and signature:
Honble Ms Archana Wadhwa, Member Judicial
Honble Mr.Mathew John, Technical Member
_________________________________________________
1. Whether Press Reporters may be allowed to see
The order for publication as per Rule 27 of the
CESTAT(Procedure) Rules, 1982?
2. Whether it would be released under Rule 27 of
the CESTAT (Procedure) rules, 1982 for
publication in any authoritative report or not?
3. Whether their lordships wish to see the fair
copy of the order?
4. Whether order is to be circulated to the
Department Authorities?
M/s Em Pee Motors Ltd Appellant
Vs
CCE, Chandgiarh Respondent
Appeared for the Appellant: Shri K.K. Anand, Advocate
Appeared for the Respondent: Shri Sonal Bajaj, SDR
Coram: Honble Ms. Archana Wadhwa, Member (Judicial)
Honble Shri Mathew John, Member (Technical)
ORDER
Per Mathew John:
The appellant provided services of Authorized Service Station and Business Auxiliary Services. During the period 2003-04 to 2004-05, they had acted as agent for promoting vehicle loans provided by ICCI Bank for which the Bank paid them commission. Out of the commission paid by the Bank to the appellant, they were in fact paying some amount to the loan seekers as an incentive for taking the loan through them. This amount is hereinafter referred to as subvention. While paying service tax for amounts received as commission from the bank, the appellant deducted the amounts of subventions from the amount received from the bank and paid service tax only on the remaining portion of the commission. The Revenue made out a case that they should have paid tax on the full amount received from the bank and issued a show cause notice to the appellant demanding tax which was short paid. The show cause notice was adjudicated confirming the demand. The party filed an appeal with the Commissioner (Appeals) who dismissed the appeal filed by the appellant. Aggrieved by order of the Commissioner (Appeals), the appellant is before the Tribunal.
2. The appellant submits that the amount of subvention was directly paid by the bank to the customer taking loans and they had never received the amount. Therefore, no tax can be demanded on such amount which was not received by them. They concede that their books of account showed receipt of total amount of commission and the amount paid by the bank to the customer from such account is shown as payments in their books of account. The contention of the appellant is that this procedure was followed because the banks were under obligation to deduct TDS (Tax Deducted at Source) under Income-tax Act and they were not willing to issue TDS certificates for different individuals and that is the only reason why the amounts were reflected in their books of account. It is the contention that they should not be charged service tax on any amount which they have not received.
3. The learned DR on the other hand, submits that service tax is payable on the gross value of the services rendered by the appellant. The fact that the appellant chose to make a payment out of such value realized by him from the receiver of the services cannot alter the gross amount charged and service tax should be paid on the gross amount paid by the bank and reflected as receipts in the books of accounts of the appellant.
4. Considered arguments of both sides. It is very clear that as per Section 67 of Finance Act, 1994 service tax shall be paid on the gross amount charged by the service provider. It is also noticed that as per the submission of the appellant, the TDS certificate was issued by the Bank in the name of the appellant for deduction of income tax on the full amount paid to the appellant. This means that while filing income-tax return, he is taking the credit for entire TDS including the amount deducted on account of payments directly made to the customers. Therefore, this is an arrangement where the appellant decided to get the benefit of deduction of TDS for the whole amount for income tax purpose but to pay service tax only on the amount not of subvention. Thus there is a inherent contradiction in the stand that is being taken by the appellant before the two tax authorities. The arrangement made for the purpose of reducing incidence of income-tax is not a subject matter of these proceedings.
5. We are of the view that the amount paid by the bank for the services rendered by the appellant and reflected as receipts in the books of accounts of the appellant, should be subjected to service tax and therefore, the orders passed by the lower authorities is maintainable and thus appeal field by the appellant is rejected.
(Order pronounced on) (ARCHANA WADHWA) Member (Judicial) (MATHEW JOHN) Member (Judicial) MPS* 4