Commissioner of Central Excise, Kochi Commissionerate v. Popular Vehicles and Services Ltd.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON** **FRIDAY, THE 20TH DAY OF JULY 2018 / 29TH ASHADHA, 1940** **AGAINST THE FINAL ORDER NO.79/2010 DATED 01.02.2010 IN APPEAL NO.ST/92/2008 OF CUSTOMS,EXCISE&SERVICE TAX APP.TRIBUNAL,BANGALORE** ## **APPELLANT(S)/RESPONDENT** **THE COMMISSIONER OF CENTRAL EXCISE, COCHIN COMMISSIONERATE, C.R.BUILDING,, I.S.PRESS ROAD, ERNAKULAM, KOCHI-18.** **BY ADVS.SRI.JOHN VARGHESE,SC,CBEC SMT.PREETHA S. NAIR, SC, CBEC** ## **RESPONDENT(S)/APPELLANT:** **M/S.POPULAR VEHICLES AND SERVICES LTD., KUTTUKKARAN CENTRE, MAMANGALAM, KOCHI-682025.** **BY ADV. SRI.E.K.NANDAKUMAR (SR.) BY ADV. SRI.P.BENNY THOMAS BY ADV. SRI.P.GOPINATH BY ADV. SRI.K.JOHN MATHAI** **THIS CENTRAL EXICISE APPEAL HAVING BEEN FINALLY HEARD ON 20-07-2018, ALONG WITH CEA NOS.27/2010 AND 2/2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **CEA 26/2010** ## **APPENDIX** ## **APPELLANT'S EXHIBITS** |**ANNEXURE A-1**|**:**|**COPY OF SHOW CAUSE NOTICE NO.24/2005 DATED 13.4.2005.**| |---|---|---| |**ANNEXURE A-2**|**:**|**COPY OF SHOW CAUSE NOTICE NO.39/2005 DATED 28.6.2005.**| |**ANNEXURE A-3**|**:**|**COPY OF ORDER IN ORIGINAL NOS.4 AND 5/2006 ST DATED 17.2.2006.**| |**ANNEXURE A-4**|**:**|**COPY OF ORDER IN APPEAL NO.64/2007 DATED 30.11.2007.**| |**ANNEXURE A-5**|**:**|**COPY OF SHOW CAUSE NOTICE NO.12/2006 ST DATED 10.3.2006.**| |**ANNEXURE A-6**|**:**|**COPY OF ORDER IN ORIGINAL NO.16/2006 DATED 7.6.2006.**| |**ANNEXURE A-7**|**:**|**COPY OF ORDER IN APPEAL NO.62 & 63/2007 DATED 30.10.2007.**| |**ANNEXURE A-8**|**:**|**COPY OF CESTAT FINAL ORDER NOS.79 AND 80/2010 DATED 1.2.2010.**| |||**//TRUE COPY//**| **PS TO JUDGE.** jg-24/7 K.VINOD CHANDRAN & ASHOK MENON, JJ. ------------------------------------------CEA Nos.26 & 27 of 2010 and CEA No.2 of 2012 ------------------------------------------Dated this the 20[th] day of July, 2018 **==> picture [120 x 9] intentionally omitted <==** ## Vinod Chandran, J. We elaborately heard the arguments addressed on the questions of law in the above cases. But, when we were about to answer the questions, the learned counsel for the respondent-dealer raised two contentions before us. One regarding the maintainability of the appeal under Section 35G of the Central Excise Act, 1944 (‘Act’ for short) which provision enables an appeal under the Finance Act, 1994 as per Section 83 thereof. The argument is that the issue raised being one of classification, there could be no appeal before the High Court and the same would have to be challenged before the Honourable Supreme Court under Section 35L of the Act. The learned counsel for the respondentdealer also would place reliance on 2014 (300) ELT 217 (Ker.) [CCE, C&ST, Thiruvananthapuram v. Kerala State Beverages] and 2016 (44) STR 204 (Ker) [CCE, ST&C, Cochin v. Al-Hussam India Hajj & Umrah Services CEA 26&27/10&2/12 -2- Management] . The second contention advanced is that the present litigation policy as framed by the Ministry of Finance has withdrawn, the exception insofar as classification and refund issues, which are of legal/recurring nature. Hence, even with respect to such issues, the monetary limit applies. 2. The learned Standing Counsel for the Government of India, however, produced before us an instruction dated 11.7.2018 in which clause 4 is extracted here under: “4. It may be noted that issues involving substantial questions of law as described in para 1.3 of the instruction dt.17.8.2011 from F No.390/Misc/163/2010-JC would be contested irrespective of the prescribed monetary limits.” In such circumstances, we don’t think that the second ground raised by the assessee survives. 3. However, we have to consider the question as to whether the appeal is maintainable under Section 35G of the Act. Section 35G provides for an appeal to the High Court from every order passed by the Appellate Tribunal on or after the 1[st] July 2003; not being an order relating, among other things, to the CEA 26&27/10&2/12 -3- determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment. In the present case, there is no such issue arising, is the submission of the learned Standing Counsel for the Revenue. It is submitted that there is only a uniform tax applied under the Finance Act, 1994 and the issue is as to whether the commission obtained by the assessee could be treated to be in lieu of services rendered by the assessee; in which event it would be exigible to service tax. 4. On facts, it is to be noticed that the respondent herein is a dealer of motor vehicles. The specific transaction which comes up for consideration before us has a direct nexus with the dealership of the manufacturer of motor cars, specifically Maruti Udyog Limited. Maruti Udyog Limited has floated two subsidiary Companies by name Maruti Insurance Brokers Limited (MIBL) and Maruti Finance Limited (MFL). The former facilitates insurance cover to new vehicles and the latter; finance for purchase of new vehicles. When the respondent sells vehicles, they also help the customers in availing finance from financial CEA 26&27/10&2/12 -4- institutions for the purchase of vehicles as also obtaining insurance, a statutory requirement, from the National Insurance Company. 5. The respondent-dealer enables such services to the consumers through MIBL and MFL. The insurance is issued by any of the insurance companies, also those in the public sector, and finance from the various financial institutions. Insurance Companies and the financial institutions give a commission to the respective entities, subsidiaries of Maruti Udyog Limited, who facilitates such finance and issuance of insurance. MIBL is a constituted agent of the National Insurance Company and receives commission for the policies issued through them. The Insurance Companies also deduct and pay on behalf of their agents, service tax on the commission paid by them to MIBL. Likewise, MFL also gets commission from the financial institutions which provide finance to the consumers. MFL pays service tax component on such commission received. 6. As far as MIBL is concerned, they provide insurance auxiliary services (IAS) and the MFL provides CEA 26&27/10&2/12 -5- business auxiliary services (BAS). Out of the commission received from the insurance companies and the financial institutions, MIBL and MFL pay a commission to the respondent-dealer, since it is the respondent-dealer who facilitates such finance as also issuance of insurance. We see from the orders of the Commissioner that the said services rendered by the respondent-dealer to MIBL and MFL were taken as business auxiliary services. The facts as discernible from the order also indicate that the entire paper work, the remittance of amounts as also issuance of insurance and that regarding the finance availed, are done at the respondent's/dealer's initiative. This is the context in which the said transaction has been found to be assessable under the Finance Act, 1994 as service tax. The respondent-dealer however claims that they do not carry out any service, insofar as the Finance Act, 1994 is concerned, as business auxiliary service. 7. We are of the opinion that this is specifically an issue of deciding as to whether the particular transaction or the activity carried on by CEA 26&27/10&2/12 -6- the respondent-dealer would result in a service to MIBL and MFL, and as a consequence, would be covered under the Finance Act, 1994 as a business auxiliary service. We have to notice the judgment of the Division Bench of this Court in Kerala State Beverages (supra). We extract paragraphs 5 and 6 of the said judgment. “5. Thinking a little deeper, if we were to understand the classification on jurisdiction to be that what would fall before the Apex Court are only appeals either as to the rate of duty or as to the value of goods for the purpose of assessment, we may immediately note that rate of tax is a prescription of the Parliament and it is not part of judicial function to tinker with the rate of tax. This has also been noticed in Commr. of S.T., Bangalore v. Karnataka State Beverages Corpn.Ltd.[2011 (24) STR 405 (Kar)] . Secondly and more importantly, if we were to find jurisdiction with the High Courts to decide as to whether there could be levy of duty of excise in relation to a particular situation, incidence or goods, that would be conceding to the position that what would be left to the Supreme Court is only to determine the rate of tax and the value of goods for the purpose of assessment which matters would get confined to issues which are fundamentally inferior in jurisprudential content vis-a-vis questions relating to the coverage itself. We do not see that the Act envisages that the High Courts would have the power of such nature that they decide the question of coverage; leaving to the Supreme Court only issues relating to the rates, sans the issue of coverage. We say this in furtherance of the reasoning that led to the precedents cited on behalf of the CEA 26&27/10&2/12 -7- respondent. 6. Learned counsel for the appellant further argued that since the rate of duty is uniform throughout India, there will be no situation of conflict of opinions between the different High Courts on any issue referable to the question of coverage. In the nature of the conclusion that we have arrived at, we are unable to accept this submission.” We respectfully follow the decision and we have to notice that it answers the specific contention taken by the learned Standing Counsel as to the uniform rate being applied. The learned Standing Counsel then raised a contention as to the provision under the Act being not applicable to the Finance Act, insofar as the value of goods and rates brought in question. We find from Al-Hussam India Hajj & Umrah Services Management (supra) that the earlier judgment of the Division Bench was followed and the appeal found to be not maintainable in the context of Finance Act, 1994. We are also of the opinion that here the question to be dealt with is specifically as to whether the activity carried on by the respondent-dealer would come within the ambit of the definition of service as defined under the Finance Act, 1994. The issue would have to be agitated before the Honorable Supreme Court CEA 26&27/10&2/12 -8- under Section 35L as has been declared by the Division Bench of this Court which binds us. The appeals are, hence, dismissed as not maintainable reserving the right of the Department to agitate their cause under Section 35L. Sd/K.VINOD CHANDRAN JUDGE Sd/ASHOK MENON JUDGE jg