2018 (11) TMI 1468 – CESTAT CHENNAI – TMI – Business Auxiliary Service – respondents as distributors were receiving 1% volume discount on the total turnover – liability of service tax – Held that:- The important takeaway from the discussions on the differing nature of assessable value, one for the purpose of levy of Central Excise duty and the other for levy of service tax, is that they are two different and distinct entities. This indeed has to be so, since the purpose of levy of central excise duty is to levy tax on production or manufacture of excisable goods in India whereas service tax is a levy on service, which by its very intrinsic nature cannot then be an activity amounting to “manufacture” and subject to Central Excise levy.
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A value or consideration undisputedly forming part of assessable value for purposes of levy of central excise duty cannot then be also considered as part of the value of taxable service for levy of service tax. This is in keeping with the fundament
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ted diligently in accordance with the provisions of law – there is no suppression of any information or facts.
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The Commissioner has correctly applied the law after appreciating the facts of the case – appeal dismissed. – Application No.ST/MISC/40793/2017 Appeal No.ST/330/2012 – FINAL ORDER No. 42883/2018 – Dated:- 29-10-2018 – Ms. Sulekha Beevi C.S. Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical) Shri S. Govindarajan, AC (AR) For the Appellant Shri C. Manickam, Sh. Ajay Kumar Gupta, Advocate & Shri D. Senthil Nathan, Consultant For the Respondent ORDER Per Bench Brief facts are that the respondents, M/s. Redington (India) Ltd are engaged in the business of distributing computer hardware and software of various manufacturers such as M/s. Hewlett Packard, IBM, Microsoft, etc. They are also engaged in maintenance and repair for these products during the warranty period as well as post warranty period. On intelligence that the respondents are not paying servic
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ors for providing reseller sell-through reports as inventory reports on weekly basis to HP. 2. From the foregoing it appeared that respondents as distributors were receiving 1% volume discount on the total turnover made, in respect of HP Products and that this was not a trade or sales discount but a commission for providing HP with strategic market information to enable them to maximize the sales of HP products wherever required. The department was of the view, that respondent were providing Business Auxiliary Service to M/s. HP. Therefore a Show Cause Notice was issued proposing to demand the service tax alongwith interest and for imposing penalties. After due process of law, the original authority dropped the proceedings holding that 1% discount is not consideration received for rendering services and hence not taxable. Aggrieved, the department is now before the Tribunal. 3. The Ld.AR, Sh.S.Govindarajan reiterated the grounds of appeal. He submitted that the findings of the adjudica
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y service in relation to promotion or marketing or sale of goods produced or provided by or belonging to the client would fall under the category of Business Auxiliary Service. Therefore when the respondents are furnishing strategic inventory reports on weekly basis, in a format specified by HP, the same is service incidental or auxiliary or promotion or marketing or sale of goods produced by HP and the 1% discount received by the respondents from HP is chargeable to service tax under Business Auxiliary Service. It is submitted that in a similar case involving M/s.HP and the respondent pertaining to the 1% discount offered to the dealer / distributor as in the present case, the CESTAT, Bangalore [2003(162) ELT 399(T)] considered the issue of includibility of the said 1% additional discount paid to the assesse as a distributor / dealer in the assessable value of the excisable goods manufactured by M/s.HP. In the said case, the Hon ble Tribunal held that the reports sent by the dealers,
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e distributors for providing reseller sell on the basis of reports and inventory reports submitted to M/s.HP. The adjudicating authority has rightly dropped the proceedings finding that the respondent was neither commission agent nor was rendering any Business Auxiliary Service. The relationship between the respondent and M/s.HP is that of manufacture and buyer and merely because an inventory report is furnished to the manufacturer in regard to the sale of goods, it cannot be said that the appellant has rendered any services to M/s.HP. The decision of the Tribunal, Bangalore rendered in 2003 (162) E.L.T.399 (Tri.-Bang) relied in the grounds of appeal by the department, has held that the 1% discount does not fall in category of permissible discount to be excluded from the assessable value of goods manufactured by HP in terms of Section 4 of Central Excise Act, 1944. For this very same reason, the said discount, if any, has to be included in the assessable value by the manufacturer namel
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r :- As per Section 65 (19) of Finance Act, 1994 ―Business Auxiliary Service‖ means any service in relation to – (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the client; or (iv) … … … … … … … … … (v) … … … … … … … … … (vi) provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, but does not include any activ
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isions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall, – (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. (2) 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. (3) The gross amount charged for the tax
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nt gets such ticket. 6.4 Duties of excise have been made leviable on goods manufactured or produced, under the provisions of the Central Excise Act, 1944, as amended. For the purpose of working out the duty of excise chargeable on any excisable goods, as per Section 4 of the Central Excise Act, inter alia, such value shall – (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. 6.5 For the removal of doubts, Explanation to Section 4 (1) declares that that the price-cum duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of the additional consideration, if any, following directly or indirectly fr
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rther clarity in respect of valuation for the purposes of levy of Central Excise duty is brought about in Central Excise Valuation Rules, 2000. So also, Service Tax (Determination of Value) Rules, 2006 have been introduced vide Notification No.12/2006-ST dt. 19.4.2006. 6.8 The important takeaway from these discussions on the differing nature of assessable value, one for the purpose of levy of Central Excise duty and the other for levy of service tax, is that they are two different and distinct entities. This indeed has to be so, since the purpose of levy of central excise duty is to levy tax on production or manufacture of excisable goods in India whereas service tax is a levy on service, which by its very intrinsic nature cannot then be an activity amounting to manufacture and subject to Central Excise levy. 6.9 The basic nature of service tax was dealt with by the Hon ble Apex Court in the case of All India Federation of Tax Practitioners Vs UOI – 2007 (7) STR 625 (S.C.) wherein it w
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the principle of equivalence in a sense that consumption of goods and consumption of services are similar as they both satisfy human needs. Today with the technological advancement there is a very thin line which divides a sale from service . That, applying the principle of equivalence, there is no difference between production or manufacture of saleable goods and production of marketable/saleable services in the form of an activity undertaken by the service provider for consideration, which correspondingly stands consumed by the service receiver. It is this principle of equivalence which is inbuilt into the concept of service tax under the Finance Act, 1994. That service tax is, therefore, a tax on an activity. That, service tax is a value added tax. The value addition is on account of the activity which provides value addition, for example, an activity undertaken by a chartered accountant or a broker is an activity undertaken by him based on his performance and skill. This is from t
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ture and subjected to excise levy and at the same time considered to be a service and subjected to service tax. In fact, the process amounting to manufacture is kept specifically out of the scope of Section 65 (19) of Finance Act, 1994 which prescribes service tax liability on processing of goods not amounting to manufacture. 6.11 It has been consistently laid down by the Tribunal, in a plethora of decisions, that consideration which is subject to payment of excise duty is not liable for payment of service tax liability. Some of such decisions, correctly cited by the Ld. Advocate for respondents, are as under : 1) Allengers Medical Systems Ltd. Vs CCE Chandigarh 2009 (14) STR 235 (Tri.-Del.) 2) Alidhara Texspin Engineers Vs CCE & Customs, Vapi 2010 (20) STR 315 (Tri.-Ahmd.) 3) Sharma and Associates Firetech Pvt. Ltd. Vs CCE Indore 2017 (51) STR 289 (Tri.-Del.) 4) Vidarbha Grindeers (P) Ltd. Vs CCE Nagpur 2015 (40) STR 331 (Tri.-Mumbai) In Jubiliant Industries Vs CCE Ghaziabad – 201
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) ELT 399 (Tri.-Bang.) and subsequently affirmed by the Hon ble Apex Court on 06.02.2004 [2004 (167) ELT A137 (SC)]. The department should have taken precautionary measures to issue periodical SCNs on the very same issue from time to time pending final decision in the matter. This being the case, we are unable to fathom the how and why of the department having taken a stand contrary to that settled by the Hon ble Apex Court on 06.02.2004 and deemed it proper to issue a SCN taking an antipodal and opposite proposition. Unless the said judgment of the Supreme Court has been further reviewed, or for that matter, the ratio laid down had been overturned by the Hon ble Apex Court itself, which is certainly not the case here, there is no justification for the department to have initiated the impugned proceedings. In our view, seeking to tax a particular commission amount under excise duty on the one hand, and in respect of the identical transaction, demanding service tax liability on the very
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d in the transaction. 14. In this connection I take support of the decision of Hon ble CESTAT in the case of M/s.Pratap Singh & Sons Vs Commissioner of Central Excise, Mumbai-I, as reported in 2007 (5) STR 389 (Tri-Mumbai), wherein it was held as follows : 5. The appellant have purchased and sold from the principals as their distributor. On purchase of the goods, the ownership changes to the appellant and as owner, dealer or transferee of the goods, it was in his own interest to promote the sales activities and to make advertisement and keep the trained salesman and hence, they are part of the dealers job. This cannot be treated as service rendered to the principals namely the manufacturers. If there was any special relationship or additional consideration leading to charging of lower price to the appellant, at the most, it can become an issue relating to valuation of the goods. The discount given by the manufacturer cannot be taken as service charges. The decision of the Commissio
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03.2007, 03.03.2008 to 05.03.2008, 26.03.2009 to 27.03.2009 and 06.07.2009 to 10.07.2009; that in the process of auditing, all the transactions were duly and properly audited by the Department; that such neither any attempt was made to conceal the facts nor to hide any information and the respondent had acted diligently in accordance with the provisions of law; that therefore it is submitted that there is no suppression of any information or facts. We find merit in these contentions also. 7. From the findings, discussions and conclusions herein above, we hold that the Commissioner has correctly applied the law after appreciating the facts of the case. We find no grounds to interfere with the impugned order. The appeal is dismissed. The miscellaneous application for change of cause title filed by department is allowed. (Operative part of the order pronounced in open court) – Case laws – Decisions – Judgements – Orders – Tax Management India – taxmanagementindia – taxmanagement – taxma
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