TMI Blog2024 (4) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... overed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RG, MEMBER (JUDICIAL) AND MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) Shri B.L. Narasimhan, Ms. Krati Singh and Ms. Shreya Khunteta, Advocates for the Appellant Shri Nikhil Kumar Singh, Shri Narinder Singh and Shri Yashpal Singh, Authorised Representatives for the Respondent ORDER M/s Maruti Suzuki India Ltd, the Appellant is engaged in manufacture of motor vehicles and parts thereof; vehicles manufactured by the Appellant are exported to distributors/ dealers in various countries with whom the Appellant entered into several distributorship agreements ( Agreement ), as per which the distributors are authorised to sell and distribute the vehicles manufactured by the Appellant; the distributors are also responsible for providing the after sales services to the customers in respect of the products sold; distributors are further required to honour the warranty claims during the warranty period to the overseas customers. The appellant reimburses various expenses, like Export warranty, Product recall charges and Goodwill warranty, incurred by the distributors in view of the Agreements. Revenue initiated proceedings against the Appellant for the Relevant Period demanding Service Tax under Bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alers are in the nature of authorised service station's services and cannot be subject to service tax under BAS ; services rendered by the overseas distributors/ dealers by rendering after sales including warranty services to the customers do not fall within the ambit of clause (1) of BAS which covers promotion, marketing and sale of goods produced or provided by the client; the Appellant cannot be called as a client of the foreign distributors/dealers as the relationship between them is that of a manufacturer and a dealer; there is no principal agent relationship between the Appellant and the overseas distributors/ dealers appointed by the Appellant; the said distributors/ dealers are acting as independent contractors, which is also apparent from the terms of the Article 5 of the Agreement; the overseas distributors are engaged in trading activity ie., buying goods from the Appellant and selling it to the customers in open market and act as sales dealer of the Appellant as per Article 12(b) of the Agreement; thus, the services rendered by the foreign distributors/ dealers etc. cannot be said to be in nature of promotion or marketing of goods of the Appellant and hence not cove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant as per Article 19 of the Agreement; the Appellant does not qualify to be a client of the foreign dealers/ distributors; rather there is a relationship of manufacturer and dealer between them; in their own cases, i.e. Maruti Suzuki India Ltd 2008 (232) ELT 566 (Tri. Del.) and Maruti Udyog Limited 2004 (170) . . . 245 (Tri. Del.) that the distributors are the dealers of the Appellant and are not acting on behalf of the Appellant. 4. Learned Counsel for the appellants, takes us through Section 65(9) and Section 65(105)(zo) of Finance Act,1994 and submits that in the instant case, the overseas distributors/dealers are responsible to provide after sale services including maintenance and repairs of the products manufactured by the Appellant during the warranty period; the activities undertaken by the overseas distributors/ dealers are more specifically covered under the definition of authorised service station services; Board Circular No. B11/1/2001-TRU, dated 9-7-2001 states that any service or repair provided by an Authorized Service Station in relation to motor cars and two-wheeled motor would be covered under the ambit of Service Tax; Circulars No. 96/7/2007-ST dated 23.08.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es carried on by the Appellant; the Appellant was subjected to regular audit by the department from time to time; department was very well aware about the activities of theAppellant; considering the fact that demand was raised basis the audit objections, involves interpretation of the complex provisions and is revenue neutral, extended period of limitation could not be invoked. He relies on the following. Mahanagar Telephone Nigam Ltd. Vs UOI 2023-TIOL- 407-HC-DEL-ST CCE C Vs M/s Reliance Industries Ltd 2023-TIOL-94- SC-CX Hyundai Motor India Pvt Ltd. Vs CCE ST, LTU, Chenai 2019 (29) G.S.T.L. 452 (Tri. - Chennai) (Affirmed by Supreme Court in 2020 (32) GSTL J154 8. Learned Counsel for the appellants submits that when no service tax is payable, question for payment of interest under Section 75 of the Act and penalty under Section 77 and 78 does not arise; penalty under Section 78 cannot be imposed; the department was aware about the activities of the Appellant at the time of issuing SCN for the period 2004-05 to 2007- 08; extended period cannot be invoked for subsequent period as there was no suppression on part of the Appellant. He relies on Nizam Sugar Factory Vs CCE, AP 2006 (197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of service. (iii) Audo Viso corporation 1991(53) ELT3 (Tri) is about changing the classification of goods imported without giving reasons, whereas, in the instant case, the adjudicating authority has taken into account all the contentions made by the appellant and given a detailed order with the reasoning. 11. Learned Authorised Representative takes us through definition and submits that the services provided by the foreign dealers to the appellants are not in the nature of Authorized Service Stations Services and falls under BAS: the distributors of the appellant located abroad are not providing services of service, repair etc. of motor vehicles to the appellant; they are doing this activity of repair service of motor vehicle to the customers who had purchased those vehicles in that country; these distributors are Authorized service stations for those customers who purchase the vehicles for them; as the ownership of the vehicles get transferred to those customers after the purchase of vehicles and it cannot be in any way construed that the services of repair/service of motor vehicle is being done by the distributors for the appellants. 12. Learned Authorised Representative takes u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the network of Authorized Repairers established and monitored by the Overseas Distributors; though the cars are first sold to Overseas Distributors and subsequently sold to the ultimate buyers, for the limited purpose of warranty services, the appellants continued to have the relationship of a service provider to the buyer of the car; the Overseas Distributors are contractually bound to provide such services on behalf of the appellant; it is the responsibility of the appellants to establish and monitor the network of Authorized Repairers. 14. Learned Authorised Representative submits that the Overseas Distributors are responsible for handling the warranty claims, monitoring of repair and maintenance services and the establishment of an entire network of Authorized Repairers for the appellant products; the appellant sells the cars to the Overseas Distributors who in turn sell it to the ultimate consumers; the appellant being the manufacturer is liable to oblige the warranty claim for which the amount is paid to Overseas Distributors who provide the repair services on behalf of the appellant; liability to pay Service Tax is cast upon the appellant under reverse charge mechanism, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the manufacturer/ pre-delivery inspection and after sale services charges and their includability in the assessable value; a case of valuation under section 4 of Central Excise Act and cannot be made applicable to the instant case of section 66 A of finance act which was introduced in 2006. He further submits on the claim of Revenue Neutrality in view of the judgement of Apex Court in the case of BCCI following Dharampal Satyapal vs. CCE-2005(183) ELT241(SC). 15. Learned Authorised Representative submits on the appellant s submission that the Cost of material and goods not be included in the taxable Service and Reimbursable expenses cannot be subject to levy of service tax that Notification no. 12/2003-ST dated 20.06.2003 provides exemption to the value of goods and materials sold by the service provider to the service recipient, with the condition that there is documentary proof indicating the value of the said goods and materials; as per the ratio of Tribunal held in the case of Ador Fontech Ltd. - 2014(36)STR; Mahendra Engineering Limited 2015 (38) STR 233 (All.). 146(Tri-Mumbai) and Tanya Automobiles (P) Ltd. vs. CCE - 2016(43) STR. 155 (Tri. -All), the exemption is availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the appellant submits additional written submissions dated 24.07.2023 and submits that the case of Hyundai Motor India (supra) relied upon by the Department did not consider the binding precedents rendered by the co-ordinate benches in the context of domestic transactions in Uttam Toyota and Mahindra Mahindra (both supra); Hyundai Motor India Pvt. Ltd. case did not consider a statutory provision relating to Authorized Service Station Service under Section 65(9) and Section 65(105)(zo) of Finance Act, 1994; the order did not consider CBEC Circulars dated 09th July 2001, 23rd August 2007 and Hon ble Apex Court s decision in the cases of TVS Motors and Philips India (both supra). Learned Counsel submits that Hon ble Supreme Court held in the cases of Babu Prasad Kaikadi- 2004 (1) SCC 681 and Government of West Bengal Vs Tarun K. Roy Others 2004 (1) SCC 347 that judgments which are rendered per incuriam statutory provisions are binding Higher Courts judgments or binding judgments of co-ordinate benches have no precedential value and hence to be ignored. Larger Bench of the Tribunal in the case of Urison Cosmetics Ltd. 2006 (198) ELT 508 (Tri. LB) held that Hon ble Madras High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shipping bills, refund claims/ demands, letters or declarations adjudicated in the decision or order to the appealed against. Thus, where an adjudication order and is passed in respect of several show cause notices by way of a composite order, only one appeal need be filed. This is so irrespective of whether the composite order-in-original is given a single number or multiple numbers. However, where distinct numbers are given to a composite adjudication order, passed in respect of a several show cause notices, and against such adjudication order appeals are preferred to the Commissioner (Appeals), in such circumstances, as many appeals must be filed before this Tribunal as the number of orders-in-original to which the case relates, in so far as the appellant is concerned. This is a consequence of Explanation (1) to Rule 6A. 7 . In the present matters, in respect of which this reference is preferred to the Bench, the subject matter of the challenge in each of the appeals is to a composite order-in-original bearing distinct numbers pertaining to multiple show cause notices. In the circumstances it is Rule 6A and not Explanation (1) that applies. As a consequence, one appeal against e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to ascertain as to any prejudice was caused resulting in an arbitrary and unjust decision. Principle of prejudice resulting from vagueness and uncertainty has to be examined in pragmatic and a reasonable manner. 20.1. We also find that Hon ble Apex Court held in the case of Pradyumna Steel Ltd. (supra) 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. We find 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 . We find 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. Though, the specific sub-clauses ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged dealers for sale, provide warranty and promote the good-will and reputation. 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, we are not in agreement with the submission of the learned Counsel for the appellant 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 considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f doubts, it is hereby declared that for the purposes of this sub-clause, service in relation to promotion or marketing of service provided by the client includes any service provided in relation to promotion or marketing of games of chance, organized, conducted or promoted by the client, in whatever form or by whatever name called, whether or not conducted online, including lottery, lotto, bingo; (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, inputs 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility of the appellant, indeed, this will satisfy customer care services provided on behalf of the client contained in sub-clause (iii) of the definition of Business Auxiliary Service , and would be taxable. 23. In view of the above, we have no hesitation whatsoever, to conclude that the services rendered by the overseas dealers/ distributors are services categorized under BAS and thus, the appellants are required to pay service tax on Reverse Charge basis. Learned Counsel for the appellants has relied upon some cases as stated above to conclude that the relationship between them and the overseas distributors/ dealers is not that of a client and principal but was on principal-to-principal basis. We have gone through the cases and find that the cases are not applicable as the facts are not comparable. As submitted by the learned Authorized Representative for the Department, they are on the issues which are different from those discussed in the instant case. For the same reason, we find that the contention of the learned Counsel for the appellants that the decision of the Chennai Bench of the Tribunal in the case of Hyundai Motors (supra) be considered as per incuriam, is not accepta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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