By TIOL News Service

MUMBAI, NOV 01, 2013: THE appellants are engaged in servicing of vehicles manufactured by M/s Tata Motors Ltd. and M/s Fiat India Ltd. During the course of audit of the records of M/s Pandit Automotive Private Ltd., Pune (M/s Pandit in short), it was noticed that though M/s Pandit are Authorized Service Station for M/s Tata Motors, however, they were only paying Service Tax on the pay-off received from the Tata Motors on servicing done during the warranty period. After the warranty period is over, their purported sister concern, who is the appellant herein, does the servicing of vehicles and no Service Tax is paid on the services done by the appellant for servicing of such vehicles. Statements of the officers of M/s Pandit revealed that M/s Panditare Authorized Dealer of Light Motor Vehicle (LMV) manufactured by M/s Tata Motors and M/s Fiat India Ltd.

However, the actual service of the vehicles manufactured by these manufacturers is done by the appellant and the Directors of the appellant firm and M/s Pandit were common. It was also noticed that M/s Tata Motors were aware of the services rendered by the appellant during the warranty period and had also approved the same.

Accordingly, a SCN dated 18.4.2011 was issued to the appellant classifying the services rendered by them as those by an 'Authorized Service Station' and demanding Service Tax of Rs.4,48,26,443/- for the services rendered during 1.10.2005 to 28.2.2011.

The said notice was adjudicated by the CCE, Pune-III confirming the demand and imposing penalties.

Before the CESTAT the following submissions were made -

+ The appellant is not an Authorized Service Station of M/s Tata Motors Ltd. and merely because they have put the logo of M/s Tata Motors on the job-card and using software system SIEBEL of M/s Tata Motors, they cannot be considered as "Authorized Service Station" as defined in law and the Revenue has not brought on record any evidence showing that they have been appointed as 'Authorized Service Station' of M/s Tata Motors Ltd.

+ The demand is time barred since as early as in 2001, M/s Pandit had sought clarification and guidance from the department regarding the liability of the appellant to pay Service Tax and the department had clarified that the appellants are not liable to pay Service Tax as 'Authorized Service Station' of M/s Tata Motors Ltd.

+ The computation of Service Tax demand is incorrect as the demand includes even sale of parts sold during the course of rendering of the services and there are also errors in computing the taxable value of the services rendered.

+ The appellants are incurring losses and, therefore, financial hardship is pleaded.

The Revenue representative mentioned the following -

+ M/s Pandit Automobile Pvt. Ltd. are authorized dealers of M/s Tata Motors and have 6 showrooms in Pune. As per the Dealership Agreement, M/s Pandit has to provide after sales service but they have no workshop for servicing of the vehicles. They are only selling the cars and the work of servicing and repairing is done by M/s Ashok Automotive Sales & Services Pvt. Ltd., who is the appellant herein. Shri Abhijeet Deshpande, Director of the appellant firm is also the Managing Director of M/s Pandit. Similarly, Shri Vijay S Gokhale, who is Director of the appellant firm is also the Deputy Managing Director of M/s Pandit. The machinery and other facilities used for servicing of vehicles are owned partially by M/s Pandit and partially by the appellant.

+ It is further seen that the appellant has been undertaking the free servicing of vehicles during the warranty period and bills were also issued by the appellant only.

+ The staff of the appellant firm were given training by M/s Tata Motors and the appellant firm has also been writing "Authorized Workshop of Tata Motors" on the job-cards and other stationeries. The appellant is using SIEBEL software of Tata Motors for generating the invoices which is given only to the authorized dealers for tracking and providing after sales service.

+ Inquiry with M/s Tata Motors revealed that they were aware that the appellant was rendering after sales service and since they were providing satisfactory services to the customers, they have not objected to the same. The dealership is visited by officials of Tata Motors on a daily basis and they were fully aware of the arrangement for sales and services of their automobiles. In view of the close relationship with M/s Pandit, they have never reduced into writing any approvals for changes and the layouts of the showroom, workshop etc. They have given full access of CRM and SIEBEL software to the appellant for tracking and providing after sales service and they were also aware that the TATA brand name has been used by the appellant on their job-cards and other stationery etc. and from which it is clear that the appellant is acting as an Authorized Service Station of M/s Tata Motors.

+ As regards the clarification given by the department in 2001, the full facts were not brought to the notice of the department and the appellant had categorically stated that they were not an Authorized Service Station. It is in the light of these submissions by the appellant it was clarified by the department that they need not get registered with the department as an Authorized Service Station. Therefore, the clarification given by the department on mis-representation of facts and, therefore, it cannot be held against the department.

+ Mistakes in the computation of Service Tax demand were never raised by the appellant before the adjudicating authority and in fact, the figures had been provided by the appellant only and, therefore, this point cannot be adduced at this point of time.

The Bench observed that from the evidences available on record it is clear that the appellant has been functioning as an 'Authorized Service Station' of M/s Tata Motors and, therefore, the services rendered by the appellant is prima facie classifiable under the category of "Authorized Service Station".

On the question of time bar, the Bench perused the letter written by the department and observed - "that the appellant had declared before the department that they are not an authorized service station and it was in that context, it was clarified by the department that they need not get registered as an authorized service station. However, it was also mentioned that they should get registered with Service Tax Department if the circumstances changed. This clarification given is a conditional one based on the information provided by the appellant and when the appellant started rendering services as an authorized workshop of M/s Tata Motors, it was incumbent upon them to bring the same to the notice of the department, which has not been done in this case. Therefore, the allegation of suppression of facts raised against the appellant is prima facie sustainable."

As regards the errors in computation of the Service tax demand, the Bench noted that these figures were provided by the Directors of the appellant firm and were never disputed by the appellant before the adjudicating authority and even in appeal memorandum; that at the interim stage of considering stay the Bench would not want to go into this issue raised for the first time and if the appellant desires they should move an application for raising additional ground for revising the tax calculations.

On the financial hardship pleaded, the Bench viewed that the appellant has substantial current assets of Rs.1.4 crore by way of trade receivables, cash and bank balances and short terms loans and advances and considering the fact that the appellant has not made out a prima facie case for grant of stay and also taking into account interest of revenue and other relevant factors, there is no room for grant of unconditional stay.

In fine, the CESTAT directed the appellant to make a pre-deposit of Rs.1.10 Crores and report compliance for obtaining stay.

In passing: In the days to come we will know whether this modus operandi is prevalent in other parts of the country!

(See 2013-TIOL-1627-CESTAT-MUM)