In The Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
[Arising out of OIA-RKA/788-789/SRT-I/2008 dated 18.11.2008 passed by the CCE (Adj.) Surat-i]
M/s Javiya Finance Services
C.C.E.& S.T.- Surat-I
For Appellant: Mr. Rohit Lalwani (Advocate)
For Respondent: Mr. K.J. Kinariwala (AR)
HON’BLE MR. RAMESH NAIR, MEMBER (JUDICIAL)
HON’BLE MR. RAJU, Member (Technical)
Date of Hearing:07.09.2018
Date of decision:18.10.2018
Final Order No. A/ 12180-12181 /2018
These appeals have been filed by M/s Javiya Finance Services & M/s Javiya Marketing against order confirming demand of service tax in respect of direct selling agent services provided by them to ICICI Bank.
2. Ld. Counsel for the appellant argued that they are engaged in providing service of identifying customers for availing car loan from ICICI Bank and they obtain commission from the Bank for these services. Commission is sought to be taxed under the head of Business Auxiliary Services. The dispute relates to the period 01.07.2003 to 30.06.2005 subsequent to this period the appellants are paying the tax. The two appellants are both proprietary concern belonging to two brothers. Ld. Counsel admitted that the taxability issue has been settled against them by the decision of Brij Motors Pvt. Ltd. 2012 (25) STR 489. However Ld. Counsel argued that they were under bonafide belief that the said services are not taxable. He pointed out that at the material time there was some confusion regarding taxability of service and therefore, extended period of limitation should not be invoked against them.
3. Ld. Counsel further argued that the amount received by them from the bank is not the amount on which service tax has been demanded. He pointed out that the bank offers certain discounts to the customers in the shape of subvention and the said amount is deducted from the amount paid to them. Consequently, the tax should be charged only on the net amount received by them after deduction of subvention.
4. Ld. AR relies on the impugned order. He argued that M/s Javiya had received payment from their clients, they had not shown entire amount of commission received in quarterly/ monthly service tax returns for the period 01.07.2003 to 30.08.2005 in respect of Javiya Finance Services. He pointed out that though Javiya Finance Services was registered but Javiya Marketing services was not even registered and had not filed any ST-3 returns. He argued that both these proprietorship concern belonging to two brothers and were operating under the same Roof. He further argued that as far as the issue of includibility of subvention in the taxable value is concerned, the matter has been settled by this Tribunal in the following decisions:
Em Pee Motors Ltd. 2012 (25) STR 68 (Tri. Del)
CST vs Jaybharat Automobles Ltd. 2016 (41) STR 311 (Tri. Mum)
CCE vs Chambal Motors Pvt. Ltd. 2008 (9) STR 275 (Tri. Del)
5. We have gone through rival submission. We find that the appellant are not contesting the demand on merit, except on the issue of valuation. It has been argued that the service tax should be denied only on the amount received by them net of subvention. In this regard, Tribunal in the case of Jaybharat Automobiles Ltd. (supra) has observed as follows:
“6.2 The question that remains to be examined is the quantum of commission actually received by the appellant from HDFC. The appellant disputes the amount indicated by HDFC in their letters to the department. The appellant insist that the amount received by them was less. The ld. Counsel argued that they should have been allowed to cross-examine officials of the bank. We are of the view that cross- examination of bank official is not necessary for such a simple factual matter. The bank has clearly indicated in their replies to the department the details of commission passed on by the bank. We find no reason to discard the information given by the bank. If appellant wanted to dispute the same, the appellant were free to get a clarification from the bank during last 7 years from 2006 when the Bank gave the details to the Department. But the appellant chose not to do so. Once the department produces a letter from the bank the onus shifts to the appellant to disprove the same. Therefore, we hold that the amount of commission paid by the bank for promotion of their financial products by the appellant to customers is subject to payment of Service Tax. The amount of commission declared by the appellant in their Service Tax Returns was less than the amount of commission declared by HDFC to the department. Even if some part of the commission was given by the bank to the customers directly on behalf of the appellant, the fact remains that the bank has shown full amount of commission as paid to the appellant. Board Circular 87/05/2006- S.T., dated 6-11-2006 supports this view while stating that if part of the dealer’s commission is shared with the customers, that is an independent transaction between the dealer and the purchaser of the vehicle, and does not involve the service rendered by the dealer to the bank. Tax payable by the dealer would be the gross amount paid by the bank. Reliance is placed on the case of Chambal Motors (supra) which held that
“From the nature of agreements on record including the franchisee agreement in the third appeal, it is clear that the assessees were, under an agreement with the bank had undertaken to provide service in relation to promotion or marketing of the ‘Banking and Financial Services’ provided by the banks. The banks were providing services under the category ‘Banking and Other financial services’ falling in clause (12) of Section 65. In relation to those services, the respondent-assessees were providing services for promotion or marketing of the banking and other financial services provided by the banks. The banks were, therefore, their clients being recipient of such services from the respondents. It has come in evidence that the respondents were required to obtain loan applications from their customers who desired to avail loans from the banks. The respondents had undertaken to process those applications and after scrutiny forward them to the bank. Admittedly, for such services, they were paid commission by the bank, which was reflected in their account. Once consideration accrued to them, as against the services provided by them to the bank, by way of commission, it was hardly of any consequence how a portion of that commission, which as per the particulars provided by the Bank was given as “pay out” to assessees in respect of which even the TDS was deducted, was spent by them. If they chose to give some amount from that gross commission amount to their customers either directly or through the bank, it would not change the nature of the receipts in their hand.”
Thus, in light of above decision as far as the valuation of services is converned the rejection of subvention cannot be permitted in light of above decision.
6. The next issue relates to invocation of extended period of limitation. We find that Javiya Marketing was neither registered with the Service Tax Department nor it was filing Service Tax returns. The definition of Business Auxiliary Services is very clear and there is no scope of interpretation. The definition specifically includes the service of promotion or marketing of any service of the client within its ambit. There is no scope for interpretation or doubt in this regard and thus there cannot be any bonafide doubt regarding taxability of the service provided by the appellant. In these circumstances, we do not find any merit in the argument on limitation canvassed by the Ld. Counsel.
7. Consequently, the appeals are dismissed.
(Pronounced in the open court on 18.10.2018)
(Raju) (Ramesh Nair)
Member (Technical) Member (Judicial)