CESTAT set aside penalties imposed on provider of “business auxiliary service” for Non discharge of tax liability

CESTAT - business auxiliary service - tax liability - Taxscan

The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) set aside penalties imposed on providers of “business auxiliary service” for Nondischarge of tax liability.

The appellant, Kankariya Automobiles (P) Ltd was an authorized dealer and service center for motor vehicles, had provided space for insurance companies to solicit customers of insurance contracts on the vehicles sold by them.

An appeal was filed with the issue of non-discharge of tax liability of Rs.17,46,066/-, as a provider of ‘business auxiliary service’, for the period between April 2007 and January 2012 which was confirmed by the original authority as payable under the proviso to Section 73(1) of Finance Act, 1994, along with interest thereon under section 75 of Finance Act, 1994, besides imposing penalties under Section 76, 77 and 78 of Finance Act, 1994.

The two-member bench of Judicial Member Ajay Sharma and Technical Member C J Mathew observed that all the decisions relied on by the Authorised Representative relied upon the decision of the Larger Bench of this Tribunal in Pagariaya Auto Centre v. Commissioner of Central Excise, Aurangabad, 2014 (33) STR 505 (Tri.Del.) which was in fact relied on by the appellant to contend the distinction between the mere provision of ‘table space’ and the actual rendering of service.

The Tribunal was of the view that this decision followed in the several decisions of the Tribunal, has clearly determined, in general, the taxability of receipts from insurance companies operating at the premises of motor vehicle dealers. The exclusion enunciated in the decision of the Larger Bench is the latitude afforded should an assessee be able to establish that only ‘table space’ was provided.

The Tribunal found that the appellant had discharged tax liability of Rs. 17,46,066/- and interest of Rs. 6,39,918/- on 14th March 2012 which precedes the issue of show cause notice. In the light of section 73(4) of Finance Act, 1994, which is the sole ground for denying recourse to Section 73(3) of Finance Act, 1994, it is clear that the appellant herein has discharged tax liability in the manner contemplated by Section 73(3) of Finance Act, 1994, upon intimation by the jurisdictional central excise officers.

The Tribunal partly allowed the appeal to the limited extent of setting aside the penalties imposed by the original authority and upheld in the impugned order.

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