Custom, Excise & Service Tax Tribunal
M/S. Roshan Motors Ltd vs Cce, Meerut on 27 November, 2008
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST BLOCK NO. 2, R.K. PURAM, NEW DELHI COURT II SERVICE TAX APPEAL NO. 253 OF 2006 [Arising out of Order-in-Appeal No. 35-CE/MRT-I/2006 passed by the Commissioner (Appeals), Central Excise, Meerut-I, Meerut] For approval and signature: Honble Mr. M. Veeraiyan, Member (Technical); Honble Mr. P.K. Das, Member (Judicial) 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 Departmental authorities? M/s. Roshan Motors Ltd., Appellant Vs. CCE, Meerut Respondent
Appearance:
Shri B.L. Narasimhan, Advocate for the appellants;
Shri A.K. Madan, Departmental Representative, for the Revenue, Coram:
Honble Mr. M. Veeraiyan, Member (Technical); Honble Mr. P.K. Das, Member (Judicial) Date of Hearing/decision: 27th November, 2008 FINAL ORDER NO._________________ dated __________ Per M. Veeraiyan:
This appeal is against Order of the Commissioner (Appeals) No. 35-CE/MRT-I/2006 dated 23.3.2006.
2. Heard both sides.
3. Relevant facts, in brief, are as follows:-
(a) the appellant is an authorized dealer of Maruti Udyog Ltd. and sell vehicles to various customers.
(b) The appellant has entered into an arrangement/agreement with financial companies, namely Kotak Mahendra Primus Ltd., ICICI Banks, and HDFC Bank for the purpose of arranging finance for vehicles sold by them to their customers.
(c) Learned advocate submits that the representative of these financial institutions are accommodated in the dealers premises itself. The prospective buyers are introduced to the finance companies and help in processing the documents and obtaining loan and vehicle sold. In connection with this the appellant is receiving service fees from the financing companies. The original authority [as well as Commissioner (Appeals)] have held that the service charges received by the appellant represents charges for business auxiliary service rendered by the appellant to the said finance companies and confirmed the service tax along with interest and imposed penalties under Section 76, 77 and, 78.
4.1. Learned advocate submits that the appellant is not rendering services to the finance companies which can attract the provisions of business auxiliary services. He submits that every case where money/consideration is received need no necessarily involve rendering of services. Arranging of finance was to enable their customer to buy vehicle from them. It is basically a service, if any, rendered in promotion of sale of vehicle by the appellant themselves. The benefit accruing to the finance companies are incidental in nature. The appellant is not selling or promoting all services of the finance companies. Their job is not exclusive promotion of services of finance companies. The mere mention that they are direct marketing agencies of the finance companies should not be mis-understood and conclusion arrived at to the fact that they are rendering business auxiliary services.
4.2. A service is rendered which benefit self and 3rd party, it cannot be treated as service to the 3rd party. He relies on the decision of the Honble Supreme Court in the case of Philips India Ltd., reported in 1997 (91) ELT 540 (SC) wherein it has been held that the advertisement carried out by the dealers benefiting both the dealer and the manufacturer cannot need to inclusion of the dealer portion of the expenses to the assessable value of the product. He also relies on the decision of the Single Member Bench of the Tribunal in the case of Silicon Honda, reported in 2007 (7) STR 475 (Tri.-Blore) and in the case of Chadha Auto Agencies, reported in 2008-TIOL-1388-CESTAT-MAD.
4.3. He also submits that this is a case of interpretation of the taxing entry and no mala fide or element of suppression or mis-statement is involved and, therefore, imposition of penalty under Section 76, 77 & 78 is not warranted.
5. Learned D.R. submits that the business auxiliary services inter alia includes promotion of service rendered by client. There is no warrant to say that the service rendered should benefit exclusively the client and no benefit should be accrued to the service provider. The terms of agreement clearly provide that the appellant is to work as direct agent for promoting auto finance scheme; that they are required to handle documentation both pre and post disbursements; that they are required to assist to recover outstanding dues from the customers and even in reprocessing the vehicle in the event of failure by the customers.
6. We have carefully considered the submissions from both sides. Normally vehicles change hands from Maruti Udyog Ltd. to the customers. The customer could have paid cash or could have arrange finance through any other person. If the third party has arranged the finance to the buyer of the vehicle, the services of the said third party would undoubtedly come under the business auxiliary services. In the present case the appellant has taken additional responsibility/functions and entered into agreement with the finance companies. The terms of agreement which we have gone through indicates that the appellant is definitely promoting the finance scheme of the finance companies but the fact that the said promotion is limited to vehicle sold for them is not significantly relevant to consider their status. In any business it can be said that both the buyer and seller are beneficiaries. Similarly in any service in a broader sense both the provider and recipient are beneficiaries. In school a teacher and student are rendering services to each other. In this case it has been stressed that the appellant is not rendering services exclusively for the finance companies. Their main object is to promote their own business. Is it a case, where the appellant is rendering services to the finance companies? Is it a case, the finance company is rendering services to the appellant? Or is it a case, the appellant is rendering services to the buyer of the vehicles? In any way the appellant is basically selling his vehicle to the customer. This arrangement help the appellant. If it was only to the benefit of the appellant, the finance companies should have charged the services charges from the appellant. The terms of the agreement together with the fact that the appellant has been paid services which was the conclusion of the appellant is rendering services and rendering services to the finance company whom we have held as client in the case of Chambal Motors (P) Ltd., reported in 2008 (9) STR 275 (Tri.-Del.). In the light of the above, we hold that the decision of the authorities in holding that the appellant render business auxiliary services to the finance companies and the service charges received by them are to subject to service tax is legal and proper and does not call for any interference.
7. However, the plea of the learned advocate that in his view interpretation of question of law is involved in the matter, we hold that this is not a fit case for imposition of penalty. Therefore, penalties imposed are set aside along with interest. Appeal is disposed of in above terms.
(Dictated & pronounced in the Open Court.) (M. VEERAIYAN) MEMBER (TECHNICAL) (P.K. DAS) MEMBER (JUDICIAL) RK