Commission forgone by automobile dealers if banks provide loans at low rate of interest liable to service tax under BAS.

PJ/Case Law/2013-14/1606

Case:-TOYOTA LAKOZY AUTO PVT LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI-II

Citation:- 2013-TIOL-814-CESTAT-MUM

Brief Facts:-Common issue is involved. Therefore, the applications for waiver of pre-deposit are being taken up together. The applicants filed the applications for waiver of pre-deposit of total amount of service tax of Rs. 3,15,81,666/-, interest and penalties.

The applicants are dealers of motor vehicles of M/s Toyota Kirloskar Motors Ltd. A total amount of Rs. 2,02,82,946/- was confirmed on the ground that the applicants are providing service of commission agent to the car manufactures. A demand of Rs. 65,56,549/- is confirmed on the charges received from customers for registration of car with the state registration authority on the ground that the applicants are providing customer care service on behalf of the manufacturers. A demand of Rs.22,09,353/- is confirmed in respect of commission foregone on marketing of loan of various banks.

Appellant Contentions:- The Appellant submits that the applicant is not acting as commission agent of the car manufacturers. The applicant is a registered dealer and purchasing cars from the manufacturer and thereafter selling the same on payment of appropriate VAT. As the applicants are purchasing and selling the car, therefore, it cannot be said that the applicants are commission agent of the car manufacturer. Hence the demand is not sustainable. In respect of the demand of Rs.65,56,549/-, the contention of the applicant is that the applicant is providing assistance of the car purchasers in respect of registration of the car with the RTO. The demand is confirmed on the ground that the applicants are providing business auxiliary service as the applicants are providing customer care service on behalf of the manufacturer as the applicants are purchasing the car from the manufacturer. The appellant submit that there cannot be any customer car service on behalf of the manufacturer when the applicants are assisting the car purchasers with the state transport authorities, it cannot be said that the applicants are promoting the business of state transport authorities as the applicants are only providing assistance for consideration to the car purchasers.

In respect of the demand of Rs. 22,09,353/-, the contention of the applicant is that in case where the car purchasers want to avail the facility of loan from the banks, the applicants are negotiating on behalf of the customers with the bank regarding the rate of interest and in case the rate of interest Is agreed to be lower than the existing rateof interest, the applicants are foregoing part of the commission receivable from the banks and the applicants are paying service tax on the commission received from the banks. Hence the demand is not sustainable.

Respondent Contentions:-The Respondent submitted that the applicants are interested in promoting the business of car manufacturer as the applicants are registered dealer. Therefore, the applicants are receiving certain amounts by way of dealer discount. Hence the demand is rightly made.

In respect of other demands, the contention is that the applicants are providing assistance to the car purchasers in getting loan at lower rate by foregoing their commission does not has force. Hence the demand is rightly made.

Reasoning of Judgment:-We have considered the submission from both side and perused the record, we find that the applicants are registered dealers of the car manufacturers M/s. Toyota Kirloskar Motor Pvt Ltd. and are purchasing the car and thereafter selling on payment of VAT. In these circumstances prima facie we find merit in the contention of the applicant that the applicants are not acting as commission agent of the manufacturer. On the same ground the amount received from the car purchaser for registration of the cars with the state transport authorities it cannot be said that the applicants are providing customer care service on behalf of the manufacturer.

In respect of the demand of Rs. 22,09,353/- the applicants are negotiating with the banks on behalf of the customers regarding car loan and where the banks agreed to give lower rate of interest the applicants foregone part of their commission. On this issue prima facie we find that the applicants are receiving commission from the banks and the applicants are foregoing part of commission in case where the bank agrees to reduce the rate of interest; the applicants had not made a case for waiver of pre-deposit of the dues.

Keeping in view of the facts and circumstances of the case, the applicants are directed to deposit an amount of rupees ten lakhs only within eight weeks. On deposit of the above mentioned amount, pre-deposit of the balance amount of service tax, interest and penalties are waived.

Decision:- Part pre-deposit ordered.

Comment:- The analogy drawn from this case is that the amount received from the car purchaser for registration of the cars with the state transport authorities does not indicates that the applicants are providing customer care service on behalf of the manufacturer. However, the applicants foregoing part of the commission receivable from the banks if banks granted loans at low rate of interest will be leviable to service tax under BAS as it amounts to promoting the business of bank by the appellant.

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PJ/Case Law/2013-14/1606

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