TaxTMI 
TaxTMI 
2024 (2) TMI 819
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....cember 2015 onwards with all assets and liabilities in respect of Chennai Operations. 1.2. Intelligence gathered by the Officers of Directorate General of Central Excise Intelligence, Bangalore Zonal Unit indicated that, appellant, M/s. Jubilant Motor Works (South) Pvt. Ltd. is evading payment of service tax, as it appeared from the ST 3 returns filed with the department, that appellant has not declared their entire service income as accounted in their books of accounts. 1.3. Further, it appeared that appellant was availing input service tax credit in respect of services which are used by them in their show room and their service centre. These show rooms and service centres are engaged in the activity of trading in cars / spares / accessories as well as providing taxable service. Thus, it appeared that appellant was availing ineligible CENVAT credit on certain common input services used for taxable services and trading and utilizing the same towards payment of their service tax liability. 1.4. Based on the said intelligence, investigations were initiated and relevant documents / records were resumed under summons proceedings. The statement of Shri Manish P. Vice-President, Finan....
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....g AUDI brand cars, * Incentive Income (retail standards) - for promoting AUDI brands by meeting the service standards of the brand at showroom and service centre, * Incentive Income (Service target) - for promoting AUDI brands by meeting the service standards of the brand at service centre, * Incentive Ambition plan - for promoting AUDI brands by meeting the service standards of the brand at show room, * Incentive Income monthly - for promoting AUDI brand cars * Incentive from VW - others - for various other activities, * Incentive AUDI genuine accessories (included in incentive income (service target) - for promoting the genuine accessories of AUDI brand to the customers, * Incentive Income AUDI genuine parts (included in incentive income (service target) for promoting the genuine parts of AUDI brand to the customers for, * Incentive SFAI - for generating market for AUDI brand of cars through customer enquiry and follow up for convincing the prospective customers to buy the cars. 1.6. It was noted that the appellant has not declared the above incentive income in the Service Tax returns and have not discharged service tax on the same. Further, incentive income from....
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....e service as per Section 65 B 51 of the Finance Act 1994. 1.10 Further, the transport of goods by road services, sponsorship services, legal services, supply of manpower for any purpose or security services, works contract services received by appellant are covered under the reverse charge mechanism as per section 68 (2) of the Finance Act 1994 read with Rule 2 (1) (d) (i) of service tax rules 1994 read with notification No.30/2012- ST dated 20.6.2012 as amended. Show Cause Notice no.66/2016-17 dated 18.10.2016 was issued to the appellant proposing to demand the service tax for the period from 4/2011 to 3/2016 and also proposing to recover the amount being 7/6/5 percentage of the value of the exempted services provided by them during the period from 4/2011 to 3/2016 for ineligible credit availed in respect of exempted service. The Show Cause notice proposed to demand interest and also for imposing penalties. After due process of law, the original authority passed the following order. (i) I confirm the demand of Service tax including of cess amounting to Rs. 10,71,78,845/- for the period from April 2011 to March 2016 Under proviso to sub-section (1) of Section 73 of the Finance A....
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....purchased from Volkswagen on principal-to-principal basis for sale to various customers. ii. The Appellant's Company was incorporated on 03.11.2015 and the Appellant took over all business activities with respect to Chennai operations of M/s Jubilant Motor Works Pvt. Ltd. (hereinafter referred to as "JMWPL") with effect from 21.12.2015, vide Business Transfer Agreement dated 18.12.2015. iii. Prior to the transfer of business to the Appellant, the Chennai operations of JMWPL (i.e., sale and service of AUDI brand cars purchased from Volkswagen) were carried on by JMWPL Company. JMWPL continues to exist till date. iv. Show Cause Notice No. 66/2016-17 dated 18.10.2016 was issued to the Appellant alleging demand of service tax on various incentive income and reversal of input tax credit for the period April 2011 to March 2016. Therefore, the demand pertaining to period prior to transfer of business is also imposed on the Appellant. v. The Impugned Order in Para 32 of the order relies on the Memorandum of Understanding (MoU) dated 16.08.2016 signed among the Appellant, JMWPL and Volkswagen to hold the Appellant is liable for the period prior to the period of transfer also (i.e., ....
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....both prior to 01.07.2012 and period form 01.07.2012, there is no specific allegation in the SCN demanding service tax on the forfeiture income. xiii. For the period prior to 01.07.2012, no finding is given by the Impugned Order. xiv. For the period from 01.07.2012, the Impugned Order states that the forfeiture income would have to be considered as a declared service falling under 66E(e) of the Act, as it amounts to agreeing to tolerate an act or a situation. xv. The Appellant owns a showroom of AUDI brand cars. The Appellant also owns an authorised service centre for providing repair and maintenance service and authorised service station services to its customers. xvi. Further, the Appellant availed Cenvat credit of various input services, including certain common input services like Security, accounting etc. xvii. On being pointed out during audit, the Appellant calculated the proportionate Cenvat credit relating to common input services as per Rule 6(3A) of CCR, 2004 and deposited an amount of Rs. 15,69,836/- towards Cenvat credit and interest of Rs. 10,71,903/- on 18.6.2016. This fact has been acknowledged in Page 38 of the Impugned Order. xviii. The Impugned Order f....
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....n liable to pay the amount of service tax. So, notice seeking to show cause should be issued under Section 73 only to the person chargeable. This decision was relied on by the Hon'ble Tribunal in JayaswalNeco Industries Ltd. v. Commissioner of Custom Central Excise & Service Tax, Raipur 2021 (47) GSTL 370 (Tri.- Del.). A.3 The Appellant submits that for the period prior to the Business Transfer Agreement, tax can be demanded only from JMWPL and not the Appellant. Hence, the demand of service tax for the period up to 20th December 2015 is liable to be set aside on this count. A.4 Further, it is submitted that the SCN did not invoke any provision for demand on the Appellant for a period that is prior to taking over of business from its predecessor Company JMWPL. However, the Impugned Order has invoked Proviso to Section 87(c) of the Act at paragraph 32 therein. The said provision, which has been introduced with effect from 06.08.2014, by Finance (No.2) Act, 2014 provides for any recovery from the successor, in case of a transfer of business. At the outset, the impugned order is incorrect in invoking a provision beyond SCN. A.5 It is not the case of the Department that as on the....
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....w.e.f. 10.09.2004 is not applicable to the period prior to 10.09.2004. A.9 Without prejudice, it is submitted that even if there was an agreement between the Appellant and JMWPL to the effect of taking over the liabilities of Chennai operations, such agreement cannot be relied upon by the Department to shift the service tax liability, if any, from JMWPL to the Appellant. In other words, a private agreement between the parties cannot have the effect of altering the statutory liability cast upon one of them. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in Deputy Commercial Tax Officer v. Sha SukrajPeerajee [1968 (21) STC 5], wherein the Department relied on the registered instrument of transfer of business to hold the transferee liable for arrears of sales tax due before the period of transfer. Holding against the Department, the Apex Court in Para 6 of the decision held that it is not open to the State Government to rely on the instrument inter vivos between the transferor and the transferee and cannot contend that there is any contractual obligation between the transferor and the State Government who is not a party to the instrument. This princip....
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....ceived by the dealers from the manufacturer is not liable to Service Tax. In this regard, reliance is placed on the decision of Hon'ble Tribunal in CST, Mumbai-I v. Sai Service Station Ltd. - 2014 (35) S.T.R. 625 (Tri-Mumbai) wherein the Hon'ble CESTAT has held that demand of service tax raised on sale/target incentive on sale of vehicles and incentive on sale of spare parts does not amount to promotion and marketing of products and demand under BAS is not sustainable. The Hon'ble Tribunal held that these incentives are in the form of a trade discount. This principle has been followed in the following decisions, i. S. K. Cars India Pvt Ltd v Commissioner of GST & Central Excise, Salem,2023-Vil-488- CESTAT -CHE-ST ii. Kafila hospitality and travels Pvt Ltd v Commissioner of sales tax ,Delhi 2021(47) G.S.T.L.140(Tri-LB) iii. Asveen Air travels Pvt Ltd v Commissioner of GST and central excise Chennai ,2022-TIOL- 404-CESTAT-MAD iv. Commissioner Of Central Excise, Jaipur-II v. LMJ Services Ltd, 2017 (3) TMI 1674 v. Sharyumotors v Commissioner of service tax, Mumbai2016 (43) S.T.R. 158 (Tri. - Mumbai) vi. My Car Private Ltd. 2015 V CCE (40) S.T.R. 1018 (Tri. - Del.) vii. Co....
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....erry vs R Sundaramurthy& Co 2019 (5) TMI 228-CESTAT Chennai. Further, reliance is placed upon the following decisions as well wherein SCNs which were vague in their allegation regarding classification of service was set aside. a) United Telecoms Limited vs CST, Hyderabad 2011 (22) S.T.R. 571 (Tri.- Bang) b) Vatsal Resources Private Limited vs CST, Surat-I 2023 (68) G.S.T.L. 279 (Tri.-Ahmd.) D.4. Consequently, the entire demand merits to be set aside on this ground itself. E. The OIO is beyond the scope of the SCN. Hence, on this ground itself, the entire demand merits to be set aside. E.1 As submitted above, the SCN has failed classify any of the services it seeks to impose Service Tax liability on the Appellant. The OIO has travelled beyond the scope of the SCN by classifying the services it seeks to impose Service Tax liability on the Appellant. E.2 The Appellant submits that the SCN is the foundation ofadjudication proceedings and if the charges are not brought out properly to the knowledge of assessee, then he should not face charges by any order passed beyond the SCN. In this regard, reliance is placed upon Apex Fluidomatics Limited vs CCE, Ahmedabad 2014 (313) E.L....
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....ing services but are imposed as a condition of the contract to compensate for the loss of "expectations interest" when the loan agreement is terminated pre-maturely. F.6 It is a well settled principle that liquidated damages and charges in the nature of penalty is not chargeable to service tax. This settled principle has been adopted in the following decisions, i. M/S Lemon tree hotel vs. Commissioner, GST,2020-TIOL-1114-CESTAT-DEL ii. M/S K.N. food industries Pvt. Ltd Vs Commissioner of CGST and Central Excise Kanpur ,2019-TIOL-3651-CESTAT-ALL iii. Rajcomp info services Ltd Vs Principal commissioner, CGSTandCentral excise-Jaipur I,2023-TIOL-154-CESTAT-DEL F.7 The Appellant submits that Circular No. 178/10/2022-GST dated 03.08.2022 issued in the GST Regime has clarified regarding the supply of service of agreeing to the obligation to refrain from an act or tolerate an act or a situation, or to do an act. The said Circular has adopted the principles laid down in the above decisions and has clarified that the amount paid as 'liquidated damages' is an amount paid only to compensate for injury, loss or damage suffered by the aggrieved party due to breach of the contract and t....
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....Commissioner Of C. Ex., Pune-I 2015 (40) S.T.R. 381 (Tri. - Mumbai) b. Reliance Life Insurance Co. Ltd v. Commissioner of ST, Mumbai 2018 (363) ELT 1050 (Tri-Mum) c. Saravana Stocks Pvt. Ltd. V Commr. Of Gst& C. Ex., Chennai 2021 (52) G.S.T.L. 408 (Tri. - Chennai) G.5 In view of the above, the Appellant submits that the impugned order proposing to demand 6%/7% of the value of exempted goods under Rule 6(3) is incorrect. The impugned order is not sustainable on merits and may be dropped. H.1 The SCN has invoked extended period of limitation for the period April 2011 to September 2014. H.2 The Appellant submits that they did not suppress any information from the Department with the intention to evade payment of Service tax. The Audit team was provided with a copy of the financial statements for the relevant period. Thus, all the facts with regard to the above transaction were within the knowledge of the Department and there has been no suppression on part of the Appellant. H.3 The Appellant further submits that there is no finding in the Impugned Order for invoking the extended period. On this ground alone, the extended period of limitation cannot be invoked. H.4 Theref....
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....So also the incentives received from Castrol India was admitted to be received for promoting and selling the Castrol brand of oils. These incentives were neither declared in ST - 3 returns nor did the appellant discharge service tax on these amounts. 3.3. To support the contention that the incentives are received by appellant from M/s. Volkswagen for providing the services of promoting the sales and business of M/s. Volkswagen, the agreement signed between M/s. Volkswagen and the appellant was adverted to by the Ld. AR. The agreement consists of money marketing and sales promotion clauses. Article 4 deals with 'Planning and supply of vehicles' and reads as under: "(1) In order to meet their mutual marketing and sales targets, the Dealer shall agree on an annual sales target for each calendar year and the dealer shall dedicate all required resources in terms of infrastructure, manpower, marketing budgets etc. requires and as may be recommended by supplier to achieve the targets set by the supplier for the year. Such annual target shall be re-negotiated when necessary in case any significant change occurs to the national automobile market and / or the sales environment". 3.4. Fur....
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.... of 5%, / 6% / 7% of the value of exempted goods (trading turnover) and the confirmation of this demand requires no interference. 3.8. The Ld. AR prayed that the appeal may be dismissed. 4. Heard both sides. 5. The issues arising for consideration are as under : (i) Whether the appellant is liable to discharge the service tax prior to 12/2015 as they have taken over the business of M/s. JMWPL only with effect from 12/2015? (ii) whether the demand of service tax on the incentives received from M/s. Volkswagen and M/s. Castrol India Ltd. are subject to levy of service tax under BAS? (iii) Whether appellant is liable to pay service tax on the amount of advance forfeited due to cancellations? (iv) Whether the appellant is liable under Rules 6 (3A) (i) to pay an amount of 5%, / 6% / 7% of value of exempted services (trading) when the appellant has already reversed proportionate credit as under Rule 6 (3 A) (ii) which is attributable to trading? 6. 1. We take up to discuss the issues (iii) to (iv) as above before taking up the discussion on issue no. (i). The appellant has received incentives / discounts from M/s.Volkswagen and M/s. Castrol India as narrated in the preceding ....
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....eration, and includes a declared service, but shall not include- (a) an activity which constitutes merely,-- i. a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or ii. such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or iii. a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. 6.3. It needs to be stated that in the Show Cause Notice, it is merely avered that the activity falls under BAS, and the specific sub clause of Section 65 (19) has not been mentioned. So from the Show Cause Notice it is not possible to understand as to why the department alleges that the activity would fall under BAS. However, in the impugned order, the adjudicating authority goes a step further to observe that the activity is in the nature of promotion of business of M/s. Volkswagen and M/s Castrol India. It requires to be stated that the agreements very clearl....
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....by or belonging to the client; or (ii) Promotion or marketing of service provided by the client; or (iii) Any customer care service provided on behalf of the client; or (iv) Procurement of goods or services which are inputs for the client; or Explanation:- for the removal of doubts, it is hereby declared that for the purposes of this sub-clause," input means all goods or services intended for use by the client. (v) Production or processing of goods for, or on behalf of, the client; (vi) Provision of service on behalf of the client; or (vii) A service incidental or auxiliary to any activity specified in sub- clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, Inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision and includes services as commission agent, but does not include any activity that amounts to manufacture of excisable goods. Explanation. For the removal of doubts, it is hereby declare that for the purposes of this clause, ... (a) "commission agent" means any person who acts on behalf of another ....
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....be made liable for payment of Service Tax under BAS, since the appellant is purchasing the cars from MUL on principal to principal basis and subsequently, reselling the same. 5. Revenue has ordered for payment of Service Tax under various receipts recorded under miscellaneous income. These include loading/unloading charges, Pollution Checkup charges, penalty-cum processing charges etc. It is obvious that these amounts have been received not towards provision of any service on behalf of MUL or anybody else. Consequently, there is no justification for levying Service Tax under BAS. 6. In miscellaneous income, commission amounts received from ICICI have also been included. This commission has been received for provision of furniture to ICICI for facilitation of accommodating representatives in the premises of the appellant for selling insurance policies for cars. Such an activity cannot be considered under BAS as has been held by the Larger Bench in the case of Pagadiya Auto Centre (supra). Consequently, we set aside the demand of Service Tax on such commission received. 7. A portion of the demand also has been raised under the category of GTA. The appellant has paid the freight....
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....ipal basis. The vehicle manufacturer M/s.Maruti Suzuki India Ltd. on the basis of yearly performance of sale grants the discount to the dealer, this discount is nothing but a discount in the sale of value of the vehicle and throughout the year therefore, these sales discount in the course of transaction of sale and purchase of the vehicles hence, the same cannot be considered as service for levy of service tax. The issue is no longer res-integra as the same has been decided in various judgement cited by the appellant. ROSHAN MOTORS PVT. LTD. 2022 (8) TMI 1254 - CESTAT NEW DELHI 10. The same view was taken by the Tribunal in CST v. Sai Service Station Ltd. - 2013 (10) TMI 1155 - CESTAT Mumbai = 2014 (35) S.T.R. 625 (Tribunal). 11. In regard to the period post "I also find that the ratio of the aforesaid case of CCE, Mumbai - I v. Sai Service Station is squarely applicable to the facts of the present case and hold that no service tax can be demanded on the 'incentive' which was in form of trade discounts, extended to the party in terms of a declared policy for achieving sales target. Accordingly, I find that the demand of service tax raised on this count is unsustainable. Thu....
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....olerate an act or a situation, or to do an act; and chargeable on full value and not on abated vale". 4. Ld. Commissioner (Appeals) in confirming the demand under this head has observed that retention of such cancellation charges is not against the provisions of intended services but for not availing the said services by the customers, which the appellant has tolerated. 5. Having considered the rival contentions, I find that the aforementioned observation of the Commissioner (Appeals) are erroneous and have no legs to stand. Admittedly, the customers pay an amount to the appellant in order to avail the hotel accommodation services and not for agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and chargeable on full value and not on abated value. The amount retained by the appellant is for, as they have kept their services available for the accommodation, and if in any case, the customers could not avail the same, thus, under the terms of the contract, they are entitled to retain the whole amount or part of it. Accordingly, I hold that the retention amount (on cancellation made) by the appellant does not undergo a change aft....
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.... the order of the Delhi Bench of the Tribunal in the case of M/s. South Eastern Coalfields Ltd. (supra) and in particular, to the following observations:- "26. Thus, a service conceived in an agreement where one person, for a consideration, agrees to an obligation to refrain from an act, would be a 'declared service' under section 66E(e) read with section 65B (44) and would be taxable under section 68 at the rate specified in section 668. Likewise, there can be services conceived in agreements in relation to the other two activities referred to in section 66E(e). 27 It is trite that an agreement has to be read as a whole so as to gather the intention of the parties. The intention of the appellant and the parties was for supply of coal; for supply of goods; and for availing various types of services. The consideration contemplated under the agreements was for such supply of coal, materials or for availing various types of services. The intention of the parties certainly was not for flouting the terms of the agreement so that the penal clauses get attracted. The penal clauses are in the nature of providing a safeguard to the commercial interest of the appellant and it can....
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....the Contract Act merely dispenses with the proof of "actual loss or damages". It does not justify the award of compensation, when in consequence of the breach no legal injury at all has resulted, because compensation for breach of contract can be awarded to make good the loss or damage which actually arose or which the parties knew when they made the contract 'to be likely to result from the breach'. The Supreme Court also found that there was no evidence that any loss was suffered by the plaintiff in consequences of the default by the defendant, save as to the loss suffered by being kept out of possession of the property. The Supreme Court, therefore, held that plaintiff would be entitled to retain only an amount of Rs. 1000/- that was received as earnest, out of amount of Rs. 25,000/-. 42. The conclusion drawn by the learned authorized representatives of the Department from the aforesaid decision of the Supreme Court that compensation received is 'synonymous' with 'tolerating' or that the Supreme Court acknowledged that in a breach of contract, one party tolerates an act or situation is not correct. 43. It is, therefore, not possible to sustain the vie....
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....mount cannot be treated as final determination of the whole financial year as envisaged under sub rule 3A(c) of the said rule. Thus by not following laid down procedure as envisaged under sub-rule 3A(c) of the said rule the appellant becomes liable to calculate and pay amount equivalent to 5% of the value on exempted services. 5.1 We have observed that in Rule 6(3) prevalent at the relevant time, two options have been provided- (i) Payment of 5% on value of exempted services (ii) Payment of an amount equal to the Cenvat Credit amount attributed to input services used in or in relation to manufacture of exempted goods or provision of exempted services as provided under sub rule (3A)(b). It is observed that the appellant has availed the option provided under sub- rule (3)(ii) of Rule 6 and paid an amount as per sub-rule (3A) along with interest and intimated the same to the jurisdictional superintendent in writing vide letter dated 14-3-2012. From the perusal of the said letter, we observed that the appellant categorically stated in the said letter that payment of Cenvat Credit, which they have made along with interest is in accordance with Rule 6 (3A) of Cenvat Credit Rules.....
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....services; (v) Cenvat credit of inputs and input services lying in balance as on the date of exercising the option under this condition. As per the submission of the appellant and perusal of their letter along with enclosed details, it is found that more or less all these particulars were intimated to the Jurisdictional Superintendent. The appellant has been filing their returns regularly on monthly basis to the department. On perusal of the copies of the such return submitted along with appeal papers, it is observed that the particulars, as required under clause (a) of sub-rule (3A) of Rule 6 has been produced to the range superintendent. Therefore all the particulars which are required to be intimated to the Jurisdictional superintendent while exercising option stand produced. Though these particulars have not been submitted specifically under a particular letter, but since these particulars otherwise by way of return and some of the information under their letters has admittedly been submitted, we are of the view, as regard this compliance of Rule 6 (3A), it stood made. 5.3. As regard the contention of the adjudicating authority that this option should be given in beginning....
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.... 5% will automatically be applied. Therefore, we do not understand that when the appellant have categorically by way of their intimation opted for option under sub-rule (3) (ii), how Revenue can insist that option (3) (i) under Rule 6 should be followed by the assessee. 5.5. As discussed above and in the facts of the case that actual Cenvat Credit attributed to the exempted services used towards sale of the bought out cars in terms of Rule 6 (3A) comes to Rs.4,06,785/- where as adjudicating authority demanded an amount of Rs.24,71,93,529/-. In our view, any amount, over and above Rs.4,06,785/- is not the part of the Cenvat Credit, which required to be reversed. The legislator has not enacted any provision by which Cenvat Credit, which is other than the credit attributed to input services used in exempted goods or services; can be recovered from the assessee. 5.6. We have gone through judgments relied upon by the Ld. A.R. in the arguments, we found that as regards the judgments on the issue of availment of Cenvat Credit on the input or input services used in dutiable and exempted goods, the provision involved in the present case i.e Rule 6 (3) (i) (ii) (3A) has not been consider....