Authority: Supreme Court of India (Civil Appellate Jurisdiction)

Order Date: 19 August 2026

Case Overview

  • Parties: Appellant – M/S TVS Motor Company Limited (automobile dealer); Respondent – Commissioner of Central Excise, Chennai‑III.
  • Issues: (i) Whether referral charges received by TVS for facilitating bank loans and insurance policies are taxable as Business Auxiliary Service (BAS) under Section 65(105)(zzb) of the Finance Act, 1994; (ii) Whether TVS suppressed turnover to evade tax, justifying penalty under Section 73/76/78.
  • Arguments: Counsel for TVS (Ms. Charanya Lakshmikumaran) argued full tax liability was paid before the show‑cause notice, invoking exemption from penalty under Section 73(3). Department counsel (Ms. Nisha Bagchi) contended TVS deliberately recorded referral charges as “miscellaneous income,” constituting suppression.
  • Tribunal Findings: The Tribunal, relying on agreements with HDFC Bank, ICICI Bank and Oriental Insurance, held that TVS’s referral charges constitute BAS because TVS promoted and marketed banking and insurance services to its dealers and customers, acting as a link in the financial institutions’ economic activity.
  • Penalty Details: Show‑cause notice dated 02‑04‑2008; tax deposits made prior to notice: Rs 1,81,560 on 31‑03‑2005, Rs 1,02,07,017 on 04‑11‑2006, Rs 19,27,172 on 21‑02‑2007, Rs 23,86,085 on 30‑03‑2007. Tribunal set aside penalty under Section 76; Court directed that penalty under Section 78 also be set aside, noting payment before notice.

Final Outcome

  • Appeal partially allowed; penalty under Sections 76 and 78 set aside; pending applications, if any, disposed of.

Topics: Taxation, Service Tax, Penalty