Custom, Excise & Service Tax Tribunal
M/S My Car Pvt. Ltd vs C.C.E., Kanpur on 8 July, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, CIRCUIT BENCH AT ALLAHABAD Date of hearing/decision: 8.7.2015 Service Tax Appeal No. 479 of 2010 (Arising out of the Order-in-Original No. 4/Commr./ST/2009 dated 23/12/09 passed by the Commissioner, Customs, Central Excise & Service Tax, Kanpur). For approval and signature: Honble Mr. Justice G. Raghuram, President Honble Mr. H.K. Thakur, Technical Member 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982? 2 Whether it should be released under Rule 26 of 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 My Car Pvt. Ltd. . Appellant vs. C.C.E., Kanpur . Respondent
Appearance:
S/Shri Amit Awasthi, Ankit Vishnoi and Ms. Yashasvini Chandra, Advocates - for the appellant Shri B.B. Sharma, A.R. for the Respondent/Revenue Coram: Honble Mr. Justice G. Raghuram, President Honble Mr. H.K. Thakur, Technical Member Final Order No. 52197/2015 dated 08/07/2015 Per. H.K. Thakur :-
This appeal has been filed by the appellant against OIO No. 4/Commr./ST/2009 dated 23/12/2009 passed by Commissioner, Central Excise, Kanpur under which a demand of Rs. 47,37,583/- has been confirmed against the appellant, alongwith interest, and penalties have also been imposed under Section 76, 77 and 78 of the Finance Act, 1994.
2. Shri Amit Awasthi (Advocate), Shri Ankit Vishnoi (Advocate) and Ms. Yashasvini Chandra (Advocate) appeared on behalf of the appellant. Learned Advocate Shri Amit Awasthi argued that appellant is an authorised dealer of Maruti Udyog Limited (MUL) and is registered with the Revenue for providing Motor Vehicle Servicing, Business Auxiliary Services and Clearing and Forwarding Services. It was argued that the case of the Revenue is regarding following incentives & reimbursements received from MUL on which service tax is required to be paid by the appellant under Business Auxiliary Service (BAS) under Section 65 (19) and Section 65 (105) (zzb) of the Finance Act, 1994.
(i) Incentive MGA (Maruti Genuine Accessories) ;
(ii) Incentive Free MGA;
(iii) Commission on Extended Warranty ;
(iv) Finance Pay out and National Subvention of MUL ;
(v) Incentive on Spare Parts ;
(vi) Reimbursement of Advertisement Expenses ;
(vii) Balance Score Card ;
(viii) Incentive on sale of Wagon R and Alto Cars ;
(ix) Incentive of Free Credit ;
(x) Incentive on sale to employees of LIC, SBI, Fetchers Scheme etc. ;
(xi) Incentive for sale of Esteem & Maruti 800 etc. ;
(xii) Misc. Spot Credit & IFC (Interest Free Credit) ;
(xiii) Moss (Maruti Online Services) ;
(xiv) Free Mega Checkup Camps ;
(xv) Exchange Charges TV (True Value) and Non TV ; and (xvi) Free Services Charges.
2.1 Learned Advocate made the Bench go through each of the above schemes/incentives/reimbursements, as discussed by the Adjudicating Authority in para 14 of the OIO dated 23/12/2009, to argue that none of these incentives and reimbursements received from MUL can be classified under BAS and these amounts are only in the nature of discounts given to the appellant based on the performance and achieving of certain targets. He relied upon the case law of Apex court in the case of Deputy Commissioner of Sales Tax vs. Motor Industries Co. Ernakulam [1983 AIR 370]. For sale of used/pre-owned vehicles he relied upon the case law SAI Service Station Ltd. vs. CCE, CUS & ST, Cochin [2015 (37) S.T.R. 516 (Tri. Bang.)] to argue that Exchange Charges TV and Non-TV are not liable to service tax. With respect to commissions received from MUL it was argued that MUL has paid service tax on the gross amount received from financial institutions which is covered as per para 17 of case law CST, Mumbai I vs. Sai Service Station Ltd. [2014 (35) S.T.R. 625 (Tri Mumbai)]. Regarding service tax on free services provided by the appellant it was argued by Learned Advocate that the same is also covered by CCE, Indore vs. Jabalpur Motors Ltd. [2014 (36) S.T.R. 1160 (Tri. Del.)]. With respect to demand raised under the head workshop service charges for financial year 2003-2004, 2004-2005 and delayed payment of service tax for financial year 2003-2004 it was argued that a total of Rs. 6,46,255/- was paid by the appellant, as per ST-3 returns filed for the financial year 2003-2004, as against Rs. 6,12,293/- held to be paid by Commissioner. It was his case that this verification of correct service tax payment can be made by the Adjudicating Authority for correct demand on workshop service charges for financial year 2004-2005. That a short brief can be filed with respect to demand under the head delayed payment of service tax for the financial year 2003-2004 also it was argued that excess payment has been made by the appellant, which needs verification.
3. Shri B.B. Sharma (AR) appearing on behalf of the Revenue argued that all the incentives received by the appellant from MUL are designed to advertise and promote the business of MUL and has to be considered as providing of BAS, as has been correctly done by the Adjudicating Authority. Learned AR thus strongly defended the orders passed by the Adjudicating Authority.
4. Heard both sides and perused the case records. Appellant has mainly argued on the parameters that various incentives given by MUL, on which service tax demand is proposed to be raised under BAS, are of the nature of trade discounts based on performances or are simply certain reimbursements made by MUL for Sales/Joint benefit, which can not be considered as provision of Business Auxiliary Services. Various activities/incentives involved in these proceedings are deliberated as follows :-
(i) Commission on Extended Variety :- Appellant is providing certain after sales services to the customers on behalf of MUL for which appellant is getting a commission from MUL and the same is accounted in their books of accounts as commission on extended warranty. Such an activity will have to be considered as a service provided on behalf of MUL and has to be considered as BAS under Section 65 (19) of the Finance Act, 1994. Order passed by the Adjudicating Authority is required to be upheld to this extent.
(ii) Maruti Online Services (MOSS) Appellant is maintaining mobile vehicles to attend to the complaints of the customers who have purchased Maruti Vehicles. As per the agreement between the appellant and MUL these facilities are required to be available by the appellant for which certain payments are received from MUL. Such a facility made available to the customers by the appellant is on behalf of MUL and such expenditures are reimbursed by MUL and not from dealers margin. Such an activity will be covered within the definition of BAS under Section 65 (19) (iii) of the Finance Act, 1994 and has been correctly held as taxable by the Adjudicating Authority.
(iii) Free Services Charges It is the case of the appellant that no separate charges are claimed from MUL for providing free services and the expenses for providing free services are met from dealers margin. Appellant relied upon the case law of CCE, Indore vs. Jabalpur Motors Ltd. [2014 (36) S.T.R. 1160 (Tri. Del.)] wherein CESTAT, Delhi held as follows in para 4 and 5 :-
4. We have considered the facts of the case. Authorised Service station is defined as under :
authorised service station means any service station, or centre, authorised by any motor vehicle manufacturer, to carry out any service, repair, reconditioning or restoration of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such manufacturer, and the related taxable service is defined as a service rendered to a customer, by an authorised service station, in relation to any service, repair, reconditioning or restoration of motor cars, light motor vehicles or two wheeled motor vehicles in any manner.
5. It is evident from the above definition that the liability to service tax is on account of the said service provided to a customer. The service is provided to the car buyers who are the customers. For the free services, no amount is charged from the customers. As regards the contention that amount towards the free services is reimbursed by Maruti Udyog Ltd., it is seen that Maruti Udyog Ltd. have categorically stated that they do not reimburse any amount towards such free services to the dealers. The respondents have also stated that providing such free services is part of the functions and duties of dealers who are entitled to the dealership commission. Also the free services are rendered to the car buyers and not to M/s MUL and the car buyers pay nothing therefore. Seen in this light it is evident that the demand of service tax as per column 5 of the table above is misconceived. Coming to the demand of servie tax on the amount received on account of salary of drivers of vans used for providing mobile service to the car owners shown in column 4 of the table, it is evident that the customer in this case is the car owner who is the recipient of service. M/s MUL receive no service nor are M/s MUL, the respondents customers. Thus the respondents have not provided the service of authorised service station to them (i.e. M/s MUL). Accordingly this amount cannot be made liable to service tax under the category of authorised service station service.
There is no evidence on record that in the present appeal also any separate consideration is received by the appellant from either MUL or the customers for providing such free service. Accordingly it is held that no service tax is payable on the free service provided by the appellant.
(iv) For incentive on spare parts it is the case of the appellant that these incentives are given to the appellant for achieving certain targets of purchase of spare parts which is purely an activity of buying and selling on which local VAT is paid at the time of sale. Appellant strongly argued that such an incentive is only a trade discount based on performance. Appellant has relied upon the case law Deputy Commissioner of Sales Tax vs. Motor Industries Co., Ernakulam (supra). Similarly appellant is getting incentives on MGA, Incentive on Free MGA, Balance Score Card, Incentive on Wagon R and Alto Cars, Incentive on Esteem and Maruti 800 etc., Incentive of free Credit, Incentive on sale of employees of LIC, SBI and Fetchers Scheme, Misc. Spot Credit and IFC, Finance pay out and National Subvention of MUL, part reimbursement of advertisement and incentive for arranging camps/sales mela and Free Mega Checkup Camps. It is the case of the appellant that all these amounts received from MUL, are either compensatory payments or in the nature of performance based trade discounts on achieving certain performance targets or is an activity which is mutually beneficial to both the appellant and MUL. It is not the case of the Revenue that MUL continues to remain the owner of the goods dealt by the appellant. All the vehicles/spares are purchased by the appellant and then sold. The incentives given by MUL has to be considered performance based trade discounts and will not be in the nature of BAS commissions. On perusal of the case records and the factual matrix we agree with the arguments of the appellant that payments received on these accounts cannot be held to be classifiable as provision of taxable services of BAS under Section 65 (19) of the Finance Act, 1994.
(v) On the issue of Exchange Charges True Value (TV) and non-True Value (non-TV), it is the case of the appellant that such activity is related to purchase of used pre-owned cars of Maruti and subsequently sale to other buyers after refurbishing or refurnishing. That such an activity is purely buying and selling activity of used/pre-owned cars and the same cannot be held to be provision of BAS to MUL. Appellant relies upon the case law of SAI Service Station Ltd. vs. CCE, CUS & ST, Cochin [2015 (37) S.T.R. 516 (Tri. Bang.)]. It is observed from the correspondence exchanged between MUL and the appellant that no consideration on this issue is received by appellant from MUL for carrying out such buying and selling of used/pre-owned cars. It is thus held that activities regarding exchange charge True Value and non-True Value cannot be considered as provision of BAS under Section 65 (19) of the Finance Act, 1994. This view is fortified by the case law of SAI Service Station Ltd. vs. CCE, CUS & ST, Cochin [2015 (37) S.T.R. 516 (Tri. Bang.)], relied upon by the appellant, where it is held that activities of buying and selling of used/pre-owned vehicles after refurbishing/repairs etc. does not have any service element.
5. Appellant also argued that with respect to demands raised; under the head of Workshop Service charges for financial year 2003-2004, 2004-2005 and demand under delayed payment of service tax for financial year 2003-2004; they have been able to reconcile certain payments made which clearly indicate that more service tax has been paid then what is demanded. We find that such a verification of claims made by the appellant can only be properly done by the Adjudicating Authority. We accordingly set aside the OIO dated 23/12/2009 on these counts and remand the same for verification to the Adjudicating Authority for deciding the issue in denovo adjudication. Needless to say that appellant should be given an opportunity of personal hearing before deciding the verification/ quantification in remand proceedings. The issue of imposition of penalties upon the appellant will also be required to be decided by the Adjudicating Authority in remand proceedings in view of the observations made by the Bench in this order.
6. Appeal filed by the appellant is allowed on the terms indicated hereinabove.
(Operative part of the order pronounced in the open court.) andl (Justice G. Raghuram) President (H.K. Thakur) Technical Member PK ??
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