Supreme Court rules referral charges taxable as business auxiliary service

The case concerns whether referral charges received by an automobile dealer for promoting bank loans and insurance policies are subject to service tax as a Business Auxiliary Service, and whether a penalty for suppression of turnover was validly imposed.

Who it concerns: Appellant: M/s TVS Motor Company Limited; Respondent: Commissioner of Central Excise, Chennai-III; Bench: Justice K. Vinod Chandran and Justice B. Pardiwala.

What the court decided

• The Court held that the referral charges received by the appellant constitute a taxable Business Auxiliary Service under Section 65(105)(zzb) of the Finance Act, 1994.
• The Court set aside the penalty imposed under Section 78 of the Finance Act, 1994, noting that the tax liability had been satisfied prior to the issuance of the show cause notice.
• The appeal was partly allowed.

Also in the document

• The Court noted that the tax liability was fully discharged before the show cause notice was issued on 02.04.2008.
• The Court relied on the finding of a larger bench of the Tribunal that the appellant was promoting and marketing services of banks and insurance companies.
• The judgment was delivered on August 19, 2026.