Amount collected as ‘Administrative and Handling Charges’ From their Sister Concerns Falls under ‘Business Support Services’ Attracts Service Tax Liability: CESTAT [Read Order]

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the amount collected as administrative and handling charges from their sister’s concerns which falls under the category of business support services attracts service tax liability. 

Susee Auto Sales & Service (P) Ltd, the appellant assessee provides services on repair and reconditioning of two-wheeler motor vehicles and the motor cars manufactured by Bajaj Auto Ltd. And Mahindra & Mahindra through their authorized service stations and also are providing ‘Business Auxiliary Services’ to various bank and financial institutions. 

The assessee appealed against the order passed by the Commissioner of Central Excise (Appeals) for confirming the demand for service tax and the imposition of a penalty. 

S. Ramamurthy, the counsel for the assessee contended that the assessee on being pointed out that their activities to their sister concern would attract levy of service tax under ‘Business Support Service’, discharged the service tax demand along with interest much before issuing of Show Cause Notice. 

Further submitted that the assessee was under bonafide belief that they are not liable to service tax for the services rendered to their sister concerns and they had also not collected the service tax amount from their sister concerns. 

N. Satyanarayanan, the counsel for the department contended that the demand would have not come to light and the assessee would have escaped from paying service tax. 

Also submitted that the extended period was rightly invoked and the penalty under section 78 of the Finance Act,1994 was imposable as suppression by the assessee was unearthed only by the department on verification of accounts. 

The Bench observed that the assessee was not contesting either the service tax demand or the interest and the assessee only confined the contest only to the imposition of the penalty imposed under sections 77 and 78 of the Finance Act. 

A single-member bench comprising Ajith Kumar (Technical) upheld the penalty imposed by the department under sections 77 and 78 of the Finance Act. 

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