Tribunal rules in favor of dealer in service tax dispute, exempts incentives as trade discounts

The Tribunal ruled in favor of the appellant, a dealer of Maruti Udyog Limited, in a service tax dispute. It held that incentives received under the dealership agreement are trade discounts not subject to service tax. The sale of spare parts during vehicle servicing was deemed a sale, not a service, exempt from service tax. Charges for assisting customers with vehicle registration and handling fees for vehicle sales were also found not liable for service tax. The appellant's availing of Cenvat credit on input services was settled. The appeal was partially allowed, setting aside the service tax demands and penalties.

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Issues Involved:
1. Charging of service tax on incentives received under the dealership agreement.
2. Inclusion of the cost of spare parts sold during vehicle servicing for service tax purposes.
3. Service tax on RTO charges for vehicle registration.
4. Service tax on handling charges received from buyers.
5. Availment of Cenvat credit on various input services.

Detailed Analysis:

1. Charging of Service Tax on Incentives Received Under Dealership Agreement:
The appellant, a dealer of Maruti Udyog Limited, contested the service tax demand on incentives received under the dealership agreement. The Tribunal referenced previous decisions, including *Toyoto Lakozy Auto Pvt. Ltd. vs. CST, C.EX., Mumbai II & V.*, which held that such incentives are in the form of trade discounts and not liable to service tax under the category of Business Auxiliary Service. The Tribunal concluded that the incentives received by the appellant from the manufacturer, designated as commission/incentive, are not subject to service tax, as these are discounts on the principal-to-principal supply of vehicles.

2. Inclusion of the Cost of Spare Parts Sold During Vehicle Servicing for Service Tax Purposes:
The appellant argued that the sale of spare parts during vehicle servicing should not be included in the service tax calculation as it constitutes a sale, not a service. The Tribunal supported this view, citing the decision in *Tanya Automobiles (P) Ltd. vs. Commissioner of C. Ex. & S.T., Meerut-I*, which confirmed that the cost of goods supplied during repair, if documented separately, should not be subject to service tax. Therefore, the demand for service tax on the sale of spare parts was set aside.

3. Service Tax on RTO Charges for Vehicle Registration:
The Tribunal examined whether the fees charged by the appellant for assisting customers with vehicle registration with the RTO were subject to service tax. Referring to *Wonder Cars Pvt. Ltd. vs. Commissioner of Central Excise, Pune-I*, the Tribunal held that such services do not fall under Business Auxiliary Service, as they are incidental and auxiliary to the primary service of selling vehicles. Thus, the service tax demand on RTO charges was annulled.

4. Service Tax on Handling Charges Received from Buyers:
The appellant's practice of charging handling fees for the sale of vehicles was also scrutinized. The Tribunal referenced *Automotive Manufacturers P. Ltd. vs. Commissioner of C.E. & C., Nagpur*, which established that handling charges included in the sale value of goods, on which VAT is paid, should not be subject to service tax. Consequently, the demand for service tax on handling charges was dismissed.

5. Availment of Cenvat Credit on Various Input Services:
The appellant had availed Cenvat credit on services such as insurance and courier services, which was contested by the department. However, the appellant had already reversed the credit along with applicable interest before the issuance of the Show Cause Notice. The Tribunal acknowledged this and deemed the issue settled.

Conclusion:
The Tribunal found that all issues raised in the appeal were previously adjudicated in favor of the appellant in similar cases. Consequently, the impugned order was not sustainable, and the appeal was allowed partially, setting aside the demands and penalties imposed by the adjudicating authority.

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