ST - Extended period of limitation cannot be invoked as issue of taxability of service was not free from doubt and matter came to be decided by Larger Bench: CESTAT
By TIOL News Service
MUMBAI, OCT 05, 2016: THE appellants are rendering services of 'Promotion and Marketing' of Car Loan and Personal Loan. They were appointed as a Direct Sales Agent (DSA) by HDFC Bank for providing service to the customers in the matter of loans for motor vehicles/personal loan etc. and getting prospective customers for the bank for which they were getting commission from the bank.
It is the contention of the Revenue that the said service falls under the category of Business Auxiliary Services (introduced from 1/7/2003)and appellant is liable to pay service tax. Moreover, as the appellant received Commission for the sales of car from car dealer/manufacturer and acted as a commission agent such activity is also chargeable to service tax as exemption has been withdrawn by Notification 8/2004-ST dated 9/7/2004. SCN demanding service tax of Rs. 76,05,431/- &Rs.1,42,114/- on the amounts received from the bank on the above two counts for the period 1/7/2003 to May 2005 is confirmed by the CCE, Mumbai .
Before the CESTAT, the appellant submitted that the issue of taxability of the service in question was not free from doubt, therefore, extended period should not be invoked. Inasmuch as the matter came to be decided by the Larger Bench in the case of Pagariya Auto Centre - 2014-TIOL-141-CESTAT-DEL-LB. Moreover, the CBEC had issued a Circular 87/06/2006-ST dated November 6, 2006 clarifying the issue. The following case laws were relied upon to substantiate their stand -
+ Bridge stone Financial Services - 2007-TIOL-810-CESTAT-BANG
+ Roshan Motors Ltd. - 2009-TIOL-76-CESTAT-DEL
+ City Motors & Financial Services - 2012-TIOL-578-CESTAT-DEL
+ South City Motors Pvt. Ltd - 2011-TIOL-1792-CESTAT-DEL
+ Gemini Mobiles Pvt. Ltd - 2015-TIOL-1567-CESTAT-ALL
Furthermore, the law at material time envisaged that only actual amount received towards services can be chargeable to service tax and, therefore, the amount of commission received from the bank and accounted for in the books of account of the appellant will only be chargeable to the service tax, hence quantification made in the SCNas well as confirmation of demand is incorrect. Also Business Auxiliary Services provided for sale of vehicle was exempted vide Notification no. 14/04-ST dated 10/09/2004 till 16/6/2005 for the reason that the appellant is proprietary concern. Jain Marketing - 2011-TIOL-361-CESTAT-MAD relied upon.
The AR while reiterating the findings of the impugned order also submitted that the appellant had not filed ST-3 returns declaring their activity hence there is suppression of fact on their part and extended period is rightly invoked. Jai Bharat Automobiles Ltd. - 2015-TIOL-1570-CESTAT-MUM relied upon.
The Bench agreed that in view of the various judgments cited by the appellant and the Board Circular dated November 6, 2006 (which were extracted in the order) the extended period of limitation cannot be invoked.
The CESTAT further observed –
++ In the present case the period involved is July 2003 to May, 2005 whereas the show cause notice was issued on 29/5/2006. As per the discussion made hereinabove extended period cannot be invoked, therefore, service tax demand upto March 2005, is hit by limitation, therefore, demand pertaining to the period July, 2003 to March, 2005, deserves to be set aside.
++ As regards the demand for the period April and May, 2005 in respect of services provided to HDFC Bank towards promotion and marketing of loan under Business Auxiliary Services, the same requires re-quantification on the ground that Adjudicating authority has not conclusively established what is the actual receipt of service charges by the appellant during the period April, 2005 and May,2005. As regard the services of sales commission in respect of sale of the vehicle for which demand of Rs.1,42,114/- was confirmed, we find that appellant has claimed notification No. 14/2004-ST dated 10/9/2004.
++ We find that the appellant is proprietary concern, therefore, they are prima facie eligible for above referred exemption notification as the services is covered under 'provisions of services on behalf of client' which is one of the services specified under the notification. However, Adjudicating authority has not given any findings as regard the claim of this notification categorically made by the appellant before him. We are therefore of the view that eligibility of this Notification should be re-considered by the Adjudicating authority.
++ Considering the facts and circumstances as well as discussion made with regard to the demand being time barred, penalties under Section 76, 77 and 78 are required to be set aside invoking Section 80.
The appeal was partly allowed.
(See 2016-TIOL-2621-CESTAT-MUM)
