M/S. Y.M. Motors Pvt. Ltd vs Commissioner Of Central Excise, Pune-I

[Arising out of Order-in-Appeal No. P-I/AK/33/2013 dtd. 14/5/2013 passed by the Commissioner (Appeals), Central Excise, Pune-I]

For approval and signature:

Honble Mr Ramesh Nair, Member (Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : seen of the Order?

4. Whether Order is to be circulated to the Departmental: Yes authorities? =======================================================

M/s. Y.M. Motors Pvt. Ltd. : Appellants

VS

Commissioner of Central Excise, Pune-I : Respondent

Appearance

Shri S.P. Sheth, Advocate for the Appellants Shri B. Kumar Iyer, Superintendent (A.R.) for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 15/6/2015 Date of decision: 15/6/2015

ORDER NO.

Per : Ramesh Nair

This appeal is directed against Order-in-Appeal No. P-I/AK/33/2013 dtd. 14/5/2013 passed by the Commissioner (Appeals), Central Excise, Pune-I, wherein Ld. Commissioner (Appeals) upheld the Order-in-Original No. PI/ADC/ST/30/2012 dated 31/8/2012 and rejected the appeal of the appellant.

2. The fact of the present case is that the appellant M/s. Y.M. Motors Pvt. Ltd are registered for providing Business Auxiliary Services and Authorized Service Station services. The appellant were not paying service tax on the commission received from banks and insurance company which was considering as taxable services under the category of business auxiliary services. It was further observed that they were recovering certain amount from the customer for RTO registration of the vehicle etc. under the head of registration charges or in the name of handling charges on which service tax appear to be leviable under the business support service. The appellant also not paying service tax on the amount charges for service of motor vehicles despite collecting the same from the consumer. On being pointed out by the department appellants paid service tax in respect of referred services. Show cause notice dated 24/4/2012 was issued proposing demand of service tax of Rs.10,67,854/- under the category of authorized service station services, service tax of Rs.2,57,172/- under the category of business auxiliary service towards amount of commission received from the banks/insurance company and service tax of Rs.2,40,752/- under the category of business support service towards amount received under registration charges or handling charges. Since the amount was already paid alongwith interest it was proposed to be appropriated against the above demand and interest. The show cause notice also proposed imposition of penalty under Section 77 and 78. The show cause notice was adjudicated wherein entire proposal made in the show cause notice was confirmed and the same was appropriated against the amount of service tax and interest already paid before issuance of show cause of notice. Being aggrieved by the said Order-in-Original dated 31/8/2012, appellant preferred appeal before the Commissioner (Appeals) who has upheld the order in original in toto.

3. Shri. S.P. Sheth, Ld. Counsel for the appellant at the out set submits that the appellant is not contesting the demand of service tax and interest, which has already been paid and he made submission only to waive the penalty of Rs.10,000/- imposed under Section 77 and penalty of Rs.15,65,778/- imposed under Section 78 of the Finance Act, 1994. He submits that since the appellant has paid entire service tax and interest before issuance of show cause notice and also paid the 25% of the penalty of Rs.15,65,778/- imposed under section 78 the penalty of equivalent amount to 75% was stood reduced in terms of first and second proviso of Section 78 and also as per option given by the adjudicating authority in Order-in-Original. As regard the penalty of Rs.10,000/- under Section 77 and 25% of the service tax amount under Section 78, he submits that appellant had newly set up the authorized service station for Toyota vehicle and being new assessee, they could not comply service tax payment in time. As regard the service tax liability on commission of bank and insurance company and service charged for RTO registration of vehicle, he submits that both the issues are highly contentious and matter was under litigation and involved interpretation of law of taxability of the said services. Therefore in respect of these services non payment of service tax at relevant time should not be construe as suppression of facts on the part of the appellant. Therefore penalty commensurate to the service tax of all these services should not have been imposed. He further submits that appellant has deposited entire service tax amount alongwith interest before issuance of show cause notice, therefore penalty imposed under Section 77 and 78 should be waived invoking Section 80 of Finance Act, 1994. He also submits that since the appellant discharged the service tax alongwith interest on pointing out by the department before issuance of show cause notice in terms of section 73(3), also no SCN and adjudication was required to be done, therefore penalties also should not have been imposed.

4. Shri. B. Kumar Iyer, Ld. Superintendent (A.R.) appearing on behalf of the Revenue reiterates the finding of the impugned order. He further submits that as regard the service tax on the authorized station service, the appellant collected service tax and not deposited to the Government exchequer, therefore submission of the Ld. Counsel that they are in the stage of newly set up service station is absolutely incorrect because when the appellant calculated the service tax they were very well aware of levy of service tax on the service of motor vehicle. Moreover they were carrying out the services of Toyota Cars as authorized service station, therefore it can not be even presumed that the appellant is not aware of service tax liability. Therefore it is serious case of defrauding the government. As regard the service tax liability on the commission from the bank and insurance service and handling charges i.e service charges for getting vehicle registered with the RTO, it is his submission that, since the appellant has admittedly discharged service tax liability in respect of services also, the appellant also well aware of the taxability of the services, therefore they have knowingly not paid the service tax before pointing out by the departmental officers. In these circumstances appellant is not entitled for the any relief from the penalty imposed by the original authority and upheld the by the Commissioner (Appeals).

5. I have carefully considered the submissions made by both sides and perused the record.

6. I find that service tax demand in this case is on three services namely:

(a) Services of motor vehicle

(b) Commission of bank and insurance company

(c) Handling charges i.e. charges for RTO registration of the vehicle.

It is observed from the records and submission made by both sides that as regard services of motor vehicle, appellant have been collecting service tax alongwith service charges and was not paying to the Government exchequer. When appellant was collecting service tax, they were well aware of the taxability of the service and for that reason only they were collecting service tax and retaining with them. I am of the view that appellant has not made out any reasonable cause for waiver of penalty imposed under Section 78 in respect of service tax demand on the services of motor vehicle. However appellant have complied with the option provided by the adjudicating authority, paid the service tax alongwith interest prior to issuance of show cause notice and 25% of penalty within one month from the date of adjudication order, therefore the penalty stand reduced to 25% of the service tax amount of Rs.10,67,854/-. I therefore upheld the said 25% of the penalty in respect of services of motor vehicle. As regard the penalty commensurate to the service tax on Rs.2,57,172/- on the commission from banks/insurance and Rs.2,40,752/- on handling charges for registration with RTO, I am convinced with the Ld. Counsel that both the issues are contentious and litigation in various forums was going on. Therefore taxability of the said services was not free from doubt, therefore the appellant in respect of these two services shown reasonable cause for waiver of penalty imposed under Section 77 and 78. In view of the above facts, I upheld penalty of 25% of the service tax amount of Rs.10,67,854/- and drop penalty imposed under Section 78 in respect of service tax paid on commission from bank/insurance company and handling charges of RTO. Penalty imposed under Section 77 for Rs.10,000/- shall stand reduced to Rs.5,000/-. The appeal is partly allowed in above the above terms.

(Dictated in court)

Ramesh Nair Member (Judicial)

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