M/S. Rana Motors Pvt. Ltd vs C.S.T., Delhi

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? Yes 3. Whether Lordships wish to see the fair copy of the order? Seen 4. Whether order is to be circulated to the Department Authorities? Yes

Appeal No.ST/606/2009-CU[DB]

[Arising out of Order-in-Original No.CCE/ADJ/PKJ/12/09 dated 25.03.2009 passed by the C.C.E., New Delhi]

M/s. Rana Motors Pvt. Ltd. Appellant

Vs.

C.S.T., Delhi Respondent

Appearance

Mr. S.K. Pahwa, Advocate - for the appellant

Mr. Ranjan Khanna, DR - for the respondent

CORAM: Honble Justice G. Raghuram, President

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

Final Order No.53825/2015, dated 24.09.2015

Per Mr. R.K. Singh :

Appeal has been filed against Order-in-Original dated 25.03.2009, in terms of which service tax demand of Rs.60,34,031/- was confirmed along with interest. Equal amount of penalty under Sections 78 and penalty of Rs.1,000/- under Section 77 of the Finance Act, 1994 were imposed.

2. Facts of the case, briefly stated, are as under:-

The appellant, a car dealer, also acted as loan marketing agent for various banks and financial institutions, namely, CMFL, ICICI Bank, ABN Amro Bank, HDFC Bank, Maruti Finance and Citi Bank and was receiving commission on it, but it did not pay any service tax. The adjudicating authority held that the appellant thus provided Business Auxiliary Service (BAS), but did not pay the impugned service tax and indulged in wilful mis-statement and suppression of facts to evade service tax.

3. During the hearing, ld. counsel for the appellant did not contest that it was providing BAS, but only pleaded that the amount of service tax shall be calculated by treating the consideration received as inclusive of service tax and the benefit of reduced penalty under Section 78 ibid should be extended. He added that the appellant has already deposited an amount of Rs.44,48,977/-. As regards commission of Rs.7,14,535/- received from Citi Bank, he contended that no service tax was chargeable thereon as the amount was received for the services provided prior to July, 2003 when BAS was not liable to service tax. He also stated that there was no wilful mis-statement or suppression of facts as there was confusion about the taxability of the impugned service and when the confusion was removed, the service tax was deposited during the month of March, 2006. Therefore, the extended period is not invocable.

4. We have considered the contentions of the appellant. We find that the appellant is not contesting the fact that it had rendered BAS. The nature of service rendered by the appellant has been perused. The appellant was essentially engaged in evaluation of prospective customers and provided operational assistance to market the car loan products of banks and NBFC. It was also acting as an intermediary between the bank and the customer for canvassing the case of the customer with the banks, scrutinizing the documentation as well as collecting and depositing the instalment cheques. It was also engaged in display of promotional material for advertising loans by the banks. Thus, it is clear that it was engaged in promotion or marketing of services provided by the clients which is clearly covered under BAS as defined under Section 65 (19) ibid. Thus, there was no scope for any ambiguity or confusion in this regard. In such a situation, there was no possibility of holding any bona fide belief regarding non-taxability of the service rendered because bona fide belief is not a hallucinatory belief but belief of a reasonable person operating in an appropriate environment. However, there is force in the appellants contentions that the amount of consideration received should have been treated as cum-tax consideration and calculation of the demand should have been done accordingly because as per Explanation 2 to Section 67 ibid, Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. The impugned demand has been confirmed on the entire amount of the consideration received without treating the consideration received as inclusive of service tax. Ld. counsel provided the calculation sheet that with the cum tax benefit the impugned demand will be reduced to Rs.55,55,430/- and has stated than an amount of Rs.44,48,977/- towards the impugned service tax demand has already been paid.

5. Regarding the contention that the service rendered to Citi Bank was prior to July, 2003 was not taxable even if the payment therefor was received after July, 2003, the appellant had not advanced this argument before the primary adjudicating authority as seen from the adjudicating order nor has it given any evidence to that effect. Therefore, this contention at this stage in the absence of evidence in its support is not acceptable.

6. It is seen that the adjudicating authority has not expressly given the option to pay reduced (25%) penalty under Section 78 ibid. In these circumstances, in the wake of the decision of Gujarat High Court in the case of Ratnamani Metals & Tubes [2013-TIOL-1124-HC-AHM-CX] such an option can be extended at the level of CESTAT also.

7. In the light of the foregoing, we partly allow the appeal to the extent that:-

(i) The impugned service tax demand is reduced to Rs.55,55,430/-.

(ii) The penalty under Section 78 ibid is reduced to 25% of Rs.55,55,430/- if the reduced penalty and the said amount of impugned service tax along with interest is paid within 30 days of the receipt of this order failing which the penalty under Section 78 ibid will be Rs.55,55,430/-.

(Justice G. Raghuram)

President

(R.K. Singh)

Member (Technical)

SSK

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