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2019 (9) TMI 583 - AT - Service TaxClassification of services - Business Auxiliary Services or not - amounts received by the Appellants from the vehicle manufacturer/ dealer and accounted by them in their book of accounts as subvention income - Case of appellant is that since the subvention income is nothing but interest against the advances the same should not be subjected to service tax - recovery of amount not/short paid. Whether the amounts received by the Appellants from the vehicle manufacturer/ dealer and accounted by them in their book of accounts as subvention income should be subjected to service tax under the category of ‘Business Auxiliary Services’ as defined by Section 65 (19) of Finance Act, 1994? HELD THAT:- We are not in agreement with the submissions made by the appellants. Once we hold that the amounts received by the appellants as “subvention charges” are consideration for providing the business auxiliary services, the manner in which they are determined are irrelevant. They may be equivalent to difference of their interest earning on loan extended in normal course and under the special scheme or can be more or less than that is immaterial for treating it is as consideration for providing the service. Similar issue decided in the case of M/S HOUSING & DEVELOPMENT CORPORATION LTD (HUDCO) VERSUS CST, AHMEDABAD [2011 (11) TMI 95 - CESTAT, AHMEDABAD] where it was held that Interest is nothing but the time-compensation for somebody’s money being retained by somebody else. The longer the period of retention, the higher will be the interest amount. In this background, the prepayment charges can never be considered to be in the nature of interest as prepayment only means payment before time. This should ideally result in refund of interest and not the demand for more interest because the borrowed money is being paid back before time. Thus we are not in position to agree with the argument of the appellants by which they contend that these subvention charges are nothing but interest on advances and hence exempt from payment of service tax.- demand of service tax in under the category of Business Auxiliary Services on the amounts received as subvention income by the Appellants is upheld. Time limitation - HELD THAT:- Appellant have not shown any reason for entertaining the so called bonafide belief that service tax was not payable in respect of the subvention income. On the contrary the fact is that they were availing the CENVAT credit in respect of input services received for providing these services. Appellants have and could not have denied the fact that they had availed CENVAT Credit in respect of the advertisements jointly issued by them along with the vehicle manufacturers/ dealers for the purpose of special schemes, offering interest at nil/ lower rate - appellant have deliberately withheld the information in respect of the subvention income recovered by them, from the department with the intention to evade payment of service tax. Hence the extended period is rightly invoked for demanding service tax from the appellant. Penalty u/s 78 - HELD THAT:- Since we uphold that the demand by invoking extended period of limitation, the penalty under Section 78 of Finance Act, 1994 to is sustained - Penalty upheld. Penalty u/s 77 of FA - HELD THAT:- Penalty under Section 77 are civil in nature and are imposed for infractions noticed since by not making proper declarations in ST-3 returns appellants have contravened the provisions of Section 70 of Finance Act, 1994 read with rule 7 of Service Tax Rules, 1994 penalties as imposed by the Commissioner under Section 77(2) too are justified - penalty upheld. Interest u/s 75 on amount short paid - HELD THAT:- The interest as provided by the statue is for the delay in the payment of tax from the due date. Since the demand has been upheld, demand for interest too is upheld - Demand of interest upheld. Appeal dismissed - decided against appellant.
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