By TIOL News Service

MUMBAI, OCT 04, 2018:THIS is a Revenue Appeal against the order passed by the CESTAT - 2017-TIOL-422-CESTAT-MUM setting aside the penalties.

The Tribunal had held thus -

ST - Respondent, a car dealer, is also a 'direct selling agent' for banks and financial institutions that provide loans to purchasers of vehicles and receives commission, charges towards pre-delivery inspection, charges for free post-sale services and commission from banks and FIs - original authority found them to be liable to tax on all these receipts but the lower appellate authority while discharging respondent from tax liability on receipts connected with sale of vehicles and parts also determined that liability on commission received from banks and FIs did arise only after 01.05.2006 when 'support services of business and commerce' became taxable; that nothing in the demand survived - Revenue in appeal.

Held: In view of the decisions in South City Motors Ltd - 2011-TIOL-1792-CESTAT-DEL & Roshan Motors Ltd - 2009-TIOL-76-CESTAT-DEL, the impugned services provided by respondent to the finance companies are liable to tax under BAS - impugned order has, therefore, erred in setting aside the tax demand of Rs.20,72,830/- for providing BAS - since the respondent has paid the tax amount before issuance of SCN, penalties are not imposable - Revenue appeal is, therefore, allowed to the extent of tax on commission from banks and financial institutions: CESTAT [para 4 to 7]

Revenue appeal partly allowed

It is the contention of the counsel for the Revenue that once the duty payment has been confirmed, the penalty should have been imposed moreso since the SCN was issued under the proviso to Section 73 of the Finance Act, 1994.

The High Court observed -

"9. We find that in the present fact while service tax has been confirmed following the decision of its Coordinate Bench in South City Motors Ltd. (supra). However, the same decision is relied upon to hold that no penalty is imposable where there was divergence of view. Therefore, in these facts, there was reasonable cause for non payment of service tax making Section 80 of the Act applicable. It is not as though the confirmation of demand would ipso facto lead to penalty. In fact, Section 80 of the Act provides for non imposition of penalty, if there is a reasonable cause. This is available in ample measure in the present facts. Thus, no fault can be found with the impugned order of the Tribunal."

The Revenue appeal was dismissed.

(See 2018-TIOL-2051-HC-MUM-ST)