2017 (3) TMI 117 - AT - Service Tax

Tribunal Rules in Favor of Authorized Dealer on Tax Liability Dispute

M/s. Satnam Auto Versus CCE & ST, Meerut-I

The Tribunal overturned the Commissioner (Appeals), Meerut's decision on tax liability for 'Publicity Expenses' and 'Target Incentive' incomes of an ... Service tax liability - 'Publicity Expenses' and 'Target Incentive' - Held that: - On the first issue regarding publicity expenses, we note that the amount shown in the show cause notice was taken from the expense entry made by the appellant in their annual P&L Account. There is no evidence of receipt of said amount from M/s. TVS Motors. There is no evidence of appellant's undertaking of publicity works for TVS Motors. In such situation, the expenses incurred by the appellant cannot be subjected to service tax under “BAS”. Regarding the tax liability for the consideration received as 'Depot Expenses', it is clear that the same were paid by the manufacturer in pursuance of the declared policy for achieving the target in sales - It was held that the target incentives received by the authorized dealer cannot be subjected to service tax under the category of 'BAS'. Reference can be made to the decision in the case of M/s. Sharyu Motors Vs. CST, Mumbai - 2015 (11) TMI 229 CESTAT Mumbai. Issues:1. Tax liability on incomes under 'Publicity Expenses' and 'Target Incentive'.Analysis:The appeal challenged an order by the Commissioner (Appeals), Meerut, regarding the tax liability of an authorized dealer of motor vehicles for TVS Motor Company. The dispute centered around 'Publicity Expenses' and 'Target Incentive' incomes. The impugned order upheld the service tax liability on these incomes due to the lack of supporting evidence from the appellant to demonstrate that these were not taxable under Business Promotion Service to TVS Motors Company.The appellant contended that the 'publicity charges' were actual expenses reflected in their Profit & Loss Account, not receipts from a third party, and were wrongly treated as such by the Department. Regarding the 'Depot Operation Receipts' from TVS Motor Company, the appellant argued that these were incentives for exceeding sales targets, not service-related income. The appellant cited established cases to support their position.The Department highlighted the appellant's failure to submit supporting evidence, with income details derived from their Profit & Loss Account. After hearing both parties and reviewing the records, the Tribunal addressed each issue individually.Regarding the 'Publicity Expenses,' the Tribunal noted the lack of evidence showing receipt of the amount from TVS Motors or the appellant's engagement in publicity works for them. Consequently, the expenses incurred could not be taxed under Business Auxiliary Service (BAS).Concerning the tax liability for 'Depot Operation Receipts,' the Tribunal recognized these incentives as part of the manufacturer's sales target policy. Referring to past cases, the Tribunal concluded that incentives received by authorized dealers for exceeding sales targets were not subject to service tax under BAS. The decision in the case of M/s. Sharyu Motors Vs. CST, Mumbai, was cited to support this position.In light of the analysis, the impugned order was deemed without merit and set aside, allowing the appeal in favor of the appellant. The judgment was pronounced in open court, bringing the matter to a close.