2024 (4) TMI 724 - CESTAT CHANDIGARH

Levy of service tax - Business Auxiliary Services (BAS) - expenses reimbursed to the foreign distributors under reverse charge mechanism - Extended period of limitation - HELD THAT:- Hon’ble Apex Court held in the case of COLLECTOR OF CENTRAL EXCISE, CALCUTTA VERSUS PRADYUMNA STEEL LTD. [1996 (1) TMI 127 - SUPREME COURT] that mere mention of wrong provision of law, when the power exercised is available even though under a different provision is by itself not sufficient to invalidate the exercise of that power. It is found that the show-cause notice was issued alleging that the appellants have not paid the service tax for the various services received by them from their overseas dealers/ distributors and that such services fall under “Business Auxiliary Service”.

It is found that the show-cause notice mentions at Para 7 that the appellants are incurred an expense on account of advertisement for sale promotion which appear to be covered under BAS. Thus, it is seen that in the instant case, the purport of the show-cause notice is to put the appellants on notice that they have received services from their foreign dealers and have not discharged due service tax under the BAS.

Whether the appellants have received services under “Business Auxiliary Services” from their overseas distributor/ dealers and if so whether they are liable to discharge duty on Reverse Charge Mechanism? - HELD THAT:- It is pertinent to note that though, the free repairs during the warranty period are undertaken by the dealer, the customer perceives that the same are provided by the manufacturer of the car. The dealers/ distributors are always associated with the manufacturer. To that extent, it is understood that the dealer/ distributor is performing his work on behalf of or as an agent of the manufacturer in this case, the appellants. Similarly, in advertising, promotion of good-will, overseeing the network of dealers/ distributors, business interest of the manufacturer of the motors is taken care even though the activity aids for his own business promotion. Therefore, the submission of the appellant not agreed upon that the relationship between the appellant and the overseas dealers is on a principal-to-principal basis. As long as the overseas dealers/ distributors are rendering some service on behalf of/ on account of/ in connection with the business of the appellant, they take the role of the manufacturer/ appellant. The overseas dealer/ distributor is receiving a consideration for this purpose. Therefore, there is a force in the argument of the Department that the services rendered are in the nature of BAS.

The Chennai Bench of the Tribunal has gone into an identical issue concerning a similarly placed manufacturer of motor cars, i.e M/S. HYUNDAI MOTOR INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX [2019 (6) TMI 856 - CESTAT CHENNAI], having similar arrangements with the overseas dealers has decided that the overseas dealers/ distributors are rendering services classifiable under BAS to the appellants therein.

It is found that as contended by the learned Authorized Representative for the Department, the exemption under Notification No.12/2003-ST dated 20.06.2003 is admissible only when goods are sold during the course of provision of service; there is documentary evidence in relation to the sale of said goods and if the appellants have not availed CENVAT credit - in the instant case, the gross value of taxable service for the purpose of computation of service tax shall be the gross amount paid by the recipient of such service.

Time Limitation - suppression of facts - HELD THAT:- It is found no case has been made by the Department to show any positive act with an intent to evade payment of duty. It is found that it was held in the case of SUNSHINE STEEL INDUSTRIES VERSUS COMMISSIONER OF CGST, CUSTOMS & CENTRAL EXCISE JODHPUR (RAJ.) [2023 (1) TMI 638 - CESTAT NEW DELHI] upheld by Supreme Court in COMMISSIONER OF CGST CUSTOMS AND CENTRAL EXCISE VERSUS SUNSHINE STEEL INDUSTRIES [2023 (7) TMI 479 - SC ORDER] that extended period cannot be invoked for a demand raised on the basis of audit. Therefore, the extended period cannot be invoked and the demand needs to be sustained only for the normal period. Looking into this background, the imposition of penalties is also not justified in the instant case.

The impugned order is modified to the extent of confirming the demand for the normal period; penalties imposed are set aside; the appeal is partially allowed.