CESTAT upholds demand of Service tax on Agency Commission for promoting sale of vehicle [Read Order]

The Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) upheld the demand of service tax on agency commission for promoting sale of vehicle. Agency Commission is amount paid by MUL for promoting the sales of vehicles when a new brand/ new version of vehicles is launched and are liable to pay service tax under Business Auxiliary Services.

M/s Anand Moters Agencies Ltd , the Appellant submitted that they have never disputed that liability arising out of the ‘Agency Commission & DGS & D Commission by MUL’. Authorized Representative do not dispute the same. Counsel appearing for Revenue stated that the issue of Sale of Extended Warranty and Consumer Care Services of Registration of Vehicles has already stand adjudicated against Revenue and with regard to Agency Commission from Maruti Udyog Ltd. and Commission Received from DGS&D, these two aspects are already subject matter of Question (2), therefore, Question (1) is not pressed.

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Commissioner of Central Excise & Service Tax, has said  that  Agency Commission is amount paid by MUL for promoting the sales of vehicles when a new brand/ new version of vehicles is launched. M/s MUL vide their letter dated 12.06.08 have explained that in cases of DGS&D sale, the dealer's act as commission agent as the transaction directly takes place with buyer. The noticee have also not disputed the issue. This is covered under sub-section (1) of definition of Business Auxiliary Services and the notices are liable to pay service tax amounting to Rs. 24,527.00.

On the point of commission received for direct sale under the DGS&D contracts, M/s MUL have stated that when Government Department wants invoicing directly from the manufacturer to cater to this category of customers, Maruti's sale transaction is directly with the buyer and dealers act as agents on dealer commission. The Noticee are liable to pay service tax amounting to Rs. 18.252.00 on direct sale covered under DGS & D instructions.

It was noted that the Commissioner has recorded that the Appellant do not dispute this liability of Rs 42,779/- which arises by ‘Agency Commission & DGS&D Commission’. That amount was not even in dispute before the Tribunal at the time of Original Appeal. Hence, there was no finding recorded in the order of the tribunal.

Thus a total demand of Rs 23,10,957.00 (Rs 17,06,518.00 + Rs. 6,04,439.00) was confirmed against the Noticee No 1 by the impugned order. Demand confirmed against the appellant was inclusive of the admitted demand of Rs 42,799.00 against Agency Commission (Rs 24,527.00) and DGS&D Commission (Rs. 18,252.00).

The Tribunal set aside the entire demand inclusive of the admitted demand which was not under challenge.A two member bench of P.K. Choudhary, Member (Judicial) and Sanjiv Srivastava, Member (Technical) observed that the  High Court has remanded the matter for reconsideration of the said demand. The do not dispute the said demand in this remand proceedings as the same was never under challenge even in the appeal filed by them. They have admitted this demand of Rs 42,799/- even at the time of adjudication.

The Tribunal upheld the demand made in respect of this amount and set aside the impugned order in respect of all other demands made as the issue in respect of those has not been remanded for reconsideration as per the order of High Court.

To Read the full text of the Order CLICK HERE

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