2011 (2) TMI 450 - AT - Service Tax

Demand - Business Auxiliary Services - Time limitation - Maruti Udyog Ltd. (MUL) had a tie up with Non Banking Finance Companies and Insurance Companies for providing respectively loans and vehicle insurance to buyers of Maruti vehicles - assessee had paid the Service tax found due from them prior to the issue of show cause notice - Commissioner restricted the demand to one year period finding that no case of suppression of facts etc. was made out against the assessee to invoke larger period of limitation -Decided in favor of the assessee

Summary

Issues:
1. Invocation of larger period for demand of Service tax under Business Auxiliary Services (BAS) and Authorized Service Station (ASS).
2. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.

Analysis:

Issue 1: Invocation of larger period for demand of Service tax under BAS and ASS:
The case involved the appeal filed by the Revenue against M/s. Abharan Motors Pvt. Ltd. Udupi for rendering services under BAS and ASS without following statutory formalities and not paying Service tax from July 2001 to March 2006. The original authority demanded Service tax and penalties under the Act. The Commissioner (Appeals) found that the larger period could not be invoked as no suppression of facts was proven against the assessee. The Commissioner restricted the demand to one year period, following the decision in the case of M/s. Nizam Sugar Factory. The Revenue appealed to restore the demand for interest and impose penalties, citing previous judgments. The Tribunal found that the Commissioner rightly restricted the liability to the normal period. However, the Tribunal held that the assessee was liable to pay interest for the delay in tax payment based on Section 75 of the Finance Act.

Issue 2: Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994:
The Revenue argued that penalties should be imposed under Sections 76 and 78 of the Act, relying on previous judgments. The Tribunal noted that the assessee had paid the tax under protest before the show cause notice was issued. The Commissioner had waived the demand of interest and penalty imposed. The Tribunal found that the Revenue did not make a strong case for imposing penalties under Sections 76 and 78 as the assessee had a genuine belief that no tax was payable on certain commissions received. The Tribunal allowed the appeal in part, emphasizing that the Revenue had not proven evasion of tax under BAS and ASS, hence penalties were not justified.

In conclusion, the Tribunal upheld the Commissioner's decision to restrict the liability to the normal period for demand of Service tax under BAS and ASS. The Tribunal also ruled that the assessee was liable to pay interest for the delay in tax payment but found no merit in imposing penalties under Sections 76 and 78 of the Finance Act, 1994.