By TIOL News Service

MUMBAI, JUNE 02, 2016: DEMAND of service tax is for the period July 2003 to March 2007 is in respect of the alleged services rendered by the appellant in the category of ‘Business Auxiliary Service' and ‘Business Support Service'. It is the case of the Revenue that during the material period appellant had received commission paid by banking and insurance companies and provided infrastructural support services for which having received some amount they ought to have discharged tax liability.

The appellant informed the Bench that on merits the issue is covered against the appellant by the larger bench decision in the case of Pagariya Auto Centre - 2014-TIOL-141-CESTAT-DEL-LB. At the same time, it is submitted that the question of limitation of the demand of the tax liability has not been addressed by the lower authorities in correct perspective in the sense that the appellant had a bona fide belief that tax liability does not arise on the amount of commission received as held in various cases and moreover the matter was finally settled by the larger bench. Furthermore, the appellant emphasized that the EA-2000 audit was conducted for the period July 2001 to March 2006 and concluded on 09/08/2006 and the demand was issued only on 21/10/2008, therefore, the same is hit by limitation.

The AR while reiterating the findings of the lower authorities submitted that the mandate for the audit party is very limited and the appellant having not declared the receipt of commission has suppressed the fact from the department and is, therefore, liable to pay service tax for the extended period also.

The Bench observed -

“6. We find that the issue of discharge of service tax liability on the commission received from the financial institutions and the insurance companies by an automobile dealer is taxable is the law now settled by the larger bench. As regards the question of limitation, on perusal of the audit report annexed to page No. 21 of the appeal memorandum, we find that it was a EA-2000 audit conducted by the service tax cell of Pune Commissionerate and the audit party undertook the audit on 03/05/2006, 10th and 12th July 2006 and on August 9, 2006. The said audit report does not indicate that they had raised a query as to taxability of the commission received by the appellant. It is undisputed that the appellant had recorded the amount of commission as income in the balance sheet. In spite of such detailed audit which was undertaken for the period July 2001 to March 2006, we find that, except for one small amount of interest not paid on the incentives, no objections were raised. It would mean that the Revenue authorities were aware of the amount received as commission by the appellant and recorded in the balance sheet. It is common knowledge that the EA-2000 audit is an extensive audit of the records of the assessee.”

Placing reliance on the Karnataka High Court decision in MTR Foods - 2011-TIOL-696-HC-KAR-CX, the Bench held that the demand is time barred and accordingly allowed the appeal by setting aside the impugned order.

(See 2016-TIOL-1314-CESTAT-MUM)