By TIOL News Service

NEW DELHI, JAN 28, 2014: THE following issue was referred to the Larger Bench by the Single Member Bench in the case of Pagariya Auto Center [2013-TIOL-289-CESTAT-MUM]:

"Whether the table space provided by the Automobile dealers to financial institutions fall under Business Auxiliary service or not?"

Whereas the appellant had referred to the decision in Tribhuvan Motors Ltd. vs. CST 2010-TIOL-57-CESTAT-BANG wherein the Bench had held that providing table space by the dealer to financial institution does not fall under the category of Business Auxiliary Service, the Revenue representative had cited the case of Brij Motors P. Ltd. vs. CCE 2011-TIOL-1992-CESTAT-DEL wherein it was has held to the contrary.

At the outset, the Larger Bench noted that the core issue involved is a classification dispute and, therefore, in the light of the provisions of section 86(7) of the FA, 1994, read with section 35D of the CEA, 1944, the dispute ought to have been resolved by a Division Bench.

Nonetheless, the Bench observed -

"7. It is therefore clear that the jurisdiction to adjudicate upon a dispute involving classification of services is conferred to a Division Bench. The substantive appeal ought therefore to have been placed before the ld. Division Bench for adjudication. It however appears that neither the assessee nor Revenue had sensitized the ld. Single Member to this legal position. In any event, since the ld. single Member did not adjudicate upon the merits of the appeal, no issue as to an exercise in excess of jurisdiction arises. The order has merely referred a conflict of opinion between judgments of this Tribunal for reference to a larger Bench. The order of reference is therefore not per se invalid, in the circumstances."

The Larger Bench also found fault in the wordings of the reference made. It observed -

"8. The specific issue referred to this larger Bench, is, in our considered view, incoherently structured. Provision of table space by automobile dealers to financial institutions may have several underlying purposes and may be predicated upon varieties of transactional instruments. Such a provision (of table space) may be incidental to lease of immovable property by the automobile dealer to the bank/financial institutions or it may be an incidental facility provided under a comprehensive agreement between the parties, whereunder the automobile dealer (under the terms of agreement between the parties, oral or written) undertakes to provide/offer a raft of services, some or all of which may be taxable services; including BAS. Mere provision of table space would provide no valuable input which permits identification of the character of the transaction for classification into one or the other or not any, taxable service.

9. In every case, where proceedings are initiated by Revenue against automobile dealers on a premise that there is an extent contractual relationship between the dealer and a bank/financial institution, whether involving a table space or otherwise, the primary analysis must involve a consideration of the relevant transactional document /agreement /MOU, between the parties, to identify the essential nature of the transaction. On such primary analysis of the transactional documents, the distillate of the transaction as ascertained by the adjudicating authority must be considered against the appropriate taxable service, in terms of its definition. After this process, the adjudicating authority if reasonably satisfied that the transaction falls within a specific taxable services, may proceed to assessment of tax, interest and penalties, as appropriate under law. The importance of the series of adjudicatory steps illustratively indicated by us, is a sine qua non of a rational adjudication process."

Be that as it may, the Larger Bench considered the various decisions in Roshan Motors Ltd. vs. CST, Mangalore 2009-TIOL-76-CESTAT-DEL; South City Motors Limited vs. CST, Delhi 2011-TIOL-1792-CESTAT-DEL; TVS Motors Co. Ltd. vs. CCE, Chennai-III 2012-TIOL-1569-CESTAT-MAD & Brij Motors P. Ltd. vs. CCE 2011-TIOL-1992-CESTAT-DEL (where it is concluded that the transaction in the facts apparent in those appeals were classifiable as BAS) and also the decisions in Silicon Honda vs. Commissioner 2007-TIOL-1159-CESTAT-BANG; Commissioner vs. Chadha Auto Agencies 2008-TIOL-1388-CESTAT-MAD and Tribhuvan Motors Ltd. vs. CST, Mangalore 2010-TIOL-57-CESTAT-BANG wherein a contrary view was recorded and concluded -

"20. On a consideration of the apparent conflict of opinion in the decisions mentioned in the order of reference and the other decisions which were cited at bar, it is clear that no uniform principle emerges as would guide determination of whether a particular transaction involving an interface between an automobile dealer and bank or financial institution would per se amount to BAS. The identification of the transaction and its appropriate classification as the taxable BAS or otherwise must clearly depend upon a careful analysis of the relevant transactional documents. Only such scrutiny and analysis would ensure rational classification of the transaction.

21. Where mere space is provided along with furniture for facilitating accommodation of representatives of financial institutions in the premises of an automobile dealer and consideration is received for that singular activity, such consideration may perhaps constitute a rent for the provision of space and associated amenities. Such restricted relationship/transaction may not amount to BAS. If on the other hand, the transactional documents and other evidence on record indicates a substantial activity falling within the contours of any of the integers of the definition of BAS, spelt out in Section 65 (19), then it would be legitimate to conclude that BAS is provided."

The reference was answered accordingly.