P.K. CHOUDHARY:

1. The present appeal is directed against Order-in-Original No.KNP-EXCUS-000-COM-001-14-15 dated 25/07/2014 passed by Commissioner of Customs, Central Excise & Service Tax, Kanpur.

2. Briefly stated, the facts of the case are that the Appellant is an authorized dealer of Tata Motors. Appellant purchases cars and commercial vehicles from Tata Motors and in-turn sells these cars and commercial vehicles to customers. Appellant is also registered for providing/receiving taxable services namely “Authorized Service Station”, Transport of Goods by Road and Business Support Services.

The Audit Officers of Central Excise Commissionerate, Kanpur, visited the premises of the Appellant and examined their accounts and records including Balance Sheets. During the scrutiny of records, it was noticed that the Appellant had received commission and Incentives from M/s Tata Motors Ltd. Further from the scrutiny of the Schedule attached to and forming part of the Profit & Loss Account of the Appellant for the period 2007-08 to 2010-11, it was found that the Appellant had received income from Job Work and freight but did not pay Service Tax on the same.

Further, show cause notice dated 12.04.2013 was issued to the Appellant, asking them to show cause as to why:-

(i) The amount of Rs.18,09,07,551/- should not be treated as the value of taxable service under the category of “Business Auxiliary Service” & “Goods Transport Agency Service” under Section 67 of the Finance Act, 1994;

(ii) Service Tax amounting to 1,70,69,897/-, Ed. Cess amounting to Rs. 3,41,117/- & H&S Ed. Cess. Amounting to Rs. 1,70,557/- (Total amounting to Rs. 1,75,10,117/-) (One Crore Seventy Five Lakhs Ten Thousand One Hundred Seventeen only) should not be demanded and recovered from them under the proviso to sub Section (1) of Section 73 of the Finance Act, 1994;

(iii) Interest should not be recovered from them under Section 75 of the Finance Act, 1994;

(iv) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994, for suppression of value of taxable service;

(v) Penalty should not be imposed upon them under Section 76 of the Finance Act, 1994, for non payment of Service Tax due thereon;

(vi) Penalty should not be imposed upon them under Section 77 of the Finance Act, 1994, for contravention of various provisions of the said Act.

Reply to show cause notice was filed. However, adjudicating authority vide the impugned order observed as under:-

ORDER

i. I order that the entire amount of Rs.18,09,07,551.00 (Rupees Eighteen Crore Nine Lac Seven Thousand Five Hundred and Fifty One) received by M/s Ashoka Auto Sales Ltd., Nunhai, Agra during the Financial Year 2011- 12 as detailed in Table-I, II, III & IV of the demandcum-show cause notice for rendering the services mentioned in respective table should be treated as taxable value as per Section 67 of the Finance Act, 1994;

ii. I confirm the demand of Service Tax amounting to Rs.1,75,10,117/- [Service Tax Rs.1.70,69,897.00+ Edu Cess Rs.3,41,117/- + H & EC Rs.1,70,557/-] (Rupees One Crore Seventy Five Lakhs Ten Thousand One Hundrea & Seventeen only) as detailed in Table-I, II, III & IV of the demand notice and adjudged against the aforesaid party and order for recovery of the said amount from them under the proviso to sub Section (1) of Section 73 of the Finance act, 1994;

iii. I also confirm the demand of interest due on the aforesaid amount and order for recovery of the same from the aforesaid party under the provisions of Section 75 of the Finance Act, 1994;

iv. I impose a penalty of Rs.10,000/- (Ten Thousand only) under Section 77 (2) of the Finance Act, 1994, for failure to submit proper and authentic Service Tax Returns in a manner as provided under Rule 7 of the Service Tax Rules, 1994 and for failure in paying proper duty in a manner as provided under Rule 6 of the Service Tax Rules, 1994, as per the provisions existing at the relevant time.

v. I also impose a penalty of Rs. 1,75,10,117/- (Rupees One Crore Seventy Five Lakhs Ten Thousand One Hundred & Seventeen only) upon the aforesaid party, under Section 78 of the Finance Act, 1994, for suppressing value of taxable service with intent to evade payment of Service Tax and also for contravention of various provisions of the Act/Rules discussed hereinabove. However, no penalty is being imposed under Section 76 of the Finance Act, 1994 due to the amendment in Section 78 of the Finance Act, 1994, on account of the period under consideration being from 10th May 2008 onwards.

Aggrieved by the above order, the Appellant filed the present appeal before this Tribunal.

The issue to be decided in the present appeal is as to whether the service tax under the category of “Business Auxiliary Service” has rightly been demanded on received income/incentive from Tata Motors Ltd., Commission received from banks/financiers, levy of service tax on hire purchase commission/other charges, Job-work charges and demand of Service Tax on Freight earned from Tata Motors Ltd.

3. The learned Advocate for the Appellant urges that so far as the sales and other incentives received as a dealer of TATA Motors Limited is concerned, there is no element of service involved in the said transaction. The manufacturer, Tata Motors during the beginning of the financial period issues their incentives or discount policy or scheme on the number of vehicles purchased and/or sold by the Appellant and other dealers and such, incentives earned is in the nature of trade discounts wholly attributable to the trading activity and as such, demand for this activity is not taxable under the Service Tax provisions.

4. The second issue is regarding commission received from banks and financial institutions. The learned Counsel explains that they have not provided any service to the said banks/financial institutions. They have only provided permission or undefined table space in their premises to the banks and financial institutions so as to facilitate the availability of loan facility to the buyers of the vehicles. Since only such facility is provided, there is no element of Business Auxiliary Service as neither they are marketing any services of client nor they are personally involved in assisting the banks/financial institutions. The banks and/or financial institutions gave some incentive or commission to the Appellant on the business generated by their own efforts, which is by using the premises of the Appellant. At best, it may be in the nature of Business Support Service but the same cannot be Business Auxiliary Service.

5. So far the issue of receipts under hire purchase commission/other charges is concerned, it is explained that the staff of the Appellant assist their customers in documentation, insurance and registration of the vehicles and sometimes in filling the forms, for hire purchase. The learned Counsel states that so far the documentation charges are concerned, these are received from the buyers of the vehicles. When a customer approaches the Appellant for purchase of vehicles, certain formalities have to be complied with, including insurance of the vehicle, registration of the vehicle, etc., which are pre-requisites under the Motor Vehicle Act, which provides that no vehicle will be issued a Gate Pass from the premises of the Appellant until and unless such formalities relating to insurance and registration are completed with. The Appellant helps the customers in completion of the documents and in getting the vehicle registered and completing the formalities. This amount received from the buyers of the vehicle, is not for promoting anybody's business. In lieu of such services, certain charges are collected directly from the customers or buyers of the vehicles. Further, these services are not provided on behalf of any third person.

6. So far as the re-possession charges are concerned, when the vehicles are sold by the banks or financial institutions on financing, in case of default by a customer in repayment of loans or installments, the vehicles are repossessed by the concerned financier, who keeps the vehicles in the Appellant's yard for convenience and nothing is charged by the Appellant from the said financier on this account. Repossession charges are directly collected from the customers/vehicle owners for using the space of the Appellant, which are in the nature of parking charges for the period the vehicles is lying in the Appellant's premises and not for any service provided to the banks/financiers. Thus, there is no element of service provided to any banks and/or financial institutions and neither the repossession charges nor the documentation charges are received from any banks and/or financial institutions and as such, the same are not chargeable to Service Tax under BAS.

7. There are two additional grounds relating to levy of service or job work and freight from customers. So far the job work is concerned, the allegation of the Revenue is that from the scrutiny of the profit and loss accounts for the period 2011-12, it was found that the Appellant had received income from the Job work during the period and it was also observed that they had received income from the freight under the two heads- 'freight received' and Freight received on transport vehicle (logistics)'. On being asked by the Audit Officers regarding supporting documents and/or clarification against these income received from Job work and Freight received on transport vehicle - logistics, the Appellant did not provide these documents to the Audit Officers on the spot nor at a later stage during investigation. Accordingly, it appeared that Freight received is in the nature of receipt as a Goods Transport Agency as defined under Section 65(50b) of the Act.

8. Further, it appeared that the job charges as found from the profit and loss accounts was also taxable under BAS, as BAS provides for any service in relation to promoting, marketing or sale of the goods for or on behalf of the client and thus, nature of job work under taken by the party was also covered. Learned Counsel explained that so far job work charges are concerned, it is the same service charges received by the Appellant for provision of services as an Authorized Service Station and it was further explained that the said job charges are in respect of servicing of commercial vehicles which is not taxable under the category of Authorized Service Station. So far providing of service to non-commercial vehicles are concerned on such job charges, the Appellant have already admittedly deposited the tax.

9. So far the Freight earned is concerned, it is explained that the Appellant is not covered under GTA as defined under Section 65(50b) of the Act, which defines GTA as - "Goods Transport Agency means any person who provides service in relation to transport of goods by road and issues consignment notes, by whatever name called". Learned Counsel further states that admittedly the Appellant have not issued any consignment note and as such no Service Tax can be demanded from them as a GTA. What the Appellant has done is that they have transported the vehicles in their own trucks from the factory or depot of Tata Motors mainly to their own premises for trading. For this work, the amount of freight, Tata Motors normally incurs have been paid to the Appellant. But, in absence of any consignment note being issued by the Appellant, the said work/service is not taxable under the classification of GTA.

10. Learned Counsel further urges that it is evident from the face of the show cause notice that all the transactions on which Service Tax have been demanded, have been duly recorded in the books of accounts ordinarily maintained by the Appellant and there is no element of any concealment or suppression on the part of the Appellant. In this view of the matter, the invocation for extended period is untenable. Further, the second show cause notice is also in the teeth of the ruling of Hon'ble Supreme Court in the case of Nizam Sugar Factory v/s CCE, A.P. 2006 (197) ELT 465 (SC).

11. The leaned Authorised Representative appearing for the Revenue has relied on the impugned order.

12. Heard both sides and perused the appeal records.

13. Having considered the rival contentions, we find that so far the sales and other incentives are concerned, the same are in the nature of trading receipts received by way of trade discounts and as such not tenable. So far as the commission received from banks and financial institutions are concerned, the relationship between the Appellant and the banks and/or financial institutions is on 'Principle to Principle basis'. Both are promoting each other’s business. The Appellant is interested in sale of the vehicle whereas the financial institutions or banks are interested in disbursement of loan for earning interest. Therefore, no particular activity done by the Appellant is identified which has the element of promoting the business of such banks and institutions save and except permission to use their premises or table space.

14. We hold that incentive or discount or commission received from the banks and institutions does not lead to the conclusion that the Appellant provided service to them. At the most, it may be in the nature of business support service which is not the case made out in the SCN. Accordingly, we hold that Service Tax is not payable on commission received from bank/financial institution.

15. So far the hire purchase commission is concerned, we hold that such charges are being received from the buyers of vehicles for assisting in registration/insurance etc. of the vehicles which is an essential requirement under the Motor Vehicle Act and the said receipts are not chargeable to Service Tax.

16. Similarly, the repossession charges received by the Appellant credited under 'other charges' in the profit & loss account are not tenable as they are received from the owners of the vehicle, whose vehicles are repossessed by the financiers and for safekeeping are entrusted to the Appellant. For such service or parking, the Appellant received an amount from the vehicle owners which we hold is not taxable under BAS. Further, these receipts are on principle to principle basis and on that score also are not liable to Service Tax.

17. So far as the job work charges are concerned, we find that the learned Commissioner has himself held that the same is not taxable under BAS but under Authorized Service Station charge, which was not the case made out in SCN and as such the demand of service tax on these charges is not tenable. Further, we hold that the receipt for service of commercial vehicle is not taxable under the category of 'Authorized Service Station'. So far the Freight received from customers/Tata Motors is concerned, we hold that essential ingredient of GTA, (that issuance of consignment notes was not done by the Appellant) thus, the same cannot be made liable to Service Tax as a GTA. Accordingly, no Service Tax is payable on this score also.

18. Thus, we allow this appeal on merits and set aside the impugned order. The Appellant shall be entitled for the consequential benefits in accordance with law.

19. Operative part of the order pronounced in open court.