M/S Magic Leasing & Finance Pvt.Ltd vs Cst, New Delhi

Date of Hearing/Order: 09.07.2015

(Arising out of Order-in-Appeal No.12/ST/DLH/2009 dt.10.2.2009 passed by the CCE (Appeals), New Delhi)

Honble Mr.R.K.Singh, Member (Technical)

Honble Ms.Sulekha Beevi C.S., Member (Judicial)

1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? no 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? no 3. Whether their Lordships wish to see the fair copy of the order? seen 4. Whether order is to be circulated to the Department Authorities? yes

M/s Magic Leasing & Finance Pvt.Ltd. Appellant

Vs.

CST, New Delhi Respondent

Present for the Appellant: Shri A.K.Batra, Advocate

Present for the Respondent: Shri Amresh Jain, AR

Coram: Honble Mr.R.K.Singh, Member (Technical)

Honble Ms.Sulekha Beevi C.S., Member (Judicial)

FINAL ORDER NO.52406/2015

PER: R.K.SINGH

Appeal has been filed against Order-in-Appeal dated 10.2.2009 which upheld the primary adjudication order dated 5.2.2008 in terms of which service tax demand of Rs.29,29,517/- was confirmed alongwith interest for the period July, 2004 to March, 2006 and equal amount of penalty under section 78 of Finance Act was also imposed. The Primary adjudicating authority duly appropriated the entire amount of service tax which was deposited by the appellant and an amount of interest of Rs.2,83,282/- deposited by the appellant was also appropriated.

2. Learned Counsel contends that the appellant (an authorized dealer of Maruti Udyog Ltd.) was registered under Business Auxiliary Service. It got commission from the banks for rendering service on which service tax was leviable and was also paid. It also got commission from Maruti Finance Ltd. (a group of company of M/s.Maruti Udyog Ltd.) on which it did not pay any service tax during July,2004 to March, 2006 believing it to be not payable as it was a commission in their capacity as sub contractor. It paid service tax by 5/4/2006 for the period 10.9.2004 to 9.9.2006 and for the period July 2004 to 9.9.2004 it did not pay service tax as M/s.Maruti Finance Ltd. clarified that it had paid service tax on the full commission received from banks ( a part of which was given to the appellant) but even that was paid alongwith interest on 16.12.2006 i.e. before the receipt of the show cause notice. The appellant contended that there was no wilful mis-statement or suppression of facts and there was confusion about the taxability of such commission as is evident from the fact that CBEC issued clarificatory circular dated 6.11.2006. In the circumstances, the appellant claimed that no penalty is imposable.

3. Learned DR on the other hand states that the appellant was paying service tax on the commission received from the banks and so it was aware of the tax liability and therefore is guilty of suppression of facts for evasion of impugned service tax amount and therefore the penalty under section 78 is attracted. He fairly conceded that the option to pay 25% penalty under section 78 of Finance Act, 1994 has not been expressly extended and so that benefit could be given to it.

4. We have considered the contentions of both sides. In this case, most (about 92%) of the impugned demand of service tax alongwith interest was deposited voluntarily by 5.4.2006 and the remaining (about 8% of the impugned demand) was deposited alongwith interest just before receipt of show cause notice. Such voluntary deposit itself gives credence to the contention of the appellant that it was under bonafide belief that the commission received from M/s.Maruti Finance Ltd. was not liable to service tax. Regarding contention of the Revenue that it was aware of taxability as it was paying service tax on the commission received from some banks, it needs to be stated that had it not paid service tax on commission received from some banks while paying service tax on commission received from other banks, that would be a case of wilful evasion but in this case, it paid service tax on commission received from all the banks and this gives credence to its contention that it was under bonafide belief that it was not liable to service tax on the commission received from Maruti Finance Ltd. (MFL) considering itself as sub contractor of MFL and it paid almost the entire (approx.92%) of the impugned demand after the position got explained to it and the remaining about 8% was not paid as MFL told it that the service tax on the entire commission it (MFL) received from banks that included the commission it (MFL) paid to the appellant was paid by it (MFL) but even that part (8% of the impugned demand) was remitted with interest before the receipt of SCN. Even the CBEC acknowledged that there has been certain doubts regarding service tax liability on commission from banks/non banking financial institutions and issued a clarificatory circular No.87/05/2006-ST dated 6.11.2006. In these circumstances, we are of the view that the appellant has made out a good case to get benefit under section 80 ibid. Indeed in a similar set of circumstances, CESTAT in the case of Auto World vs. CCE, Allahabad-2010 (17) STR 47 (Tri.-Del.) set aside the penalty. This judgement was upheld by Honble Allahabad High Court in the case of CCE vs. Auto World-2010 (18) STR 5 (All.).

4. In the foregoing circumstances, we allow appeal to the extent of setting aside the penalty.

(dictated and Pronounced in the open court)

(SULEKHA BEEVI C.S.) (R.K.SINGH)

MEMBER (JUDICIAL) MEMBER (TECHNICAL)

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