2022 (8) TMI 1254 - AT - Service Tax

Authorized dealer wins appeal against service tax on incentives and discounts

M/s Roshan Motors Pvt. Limited Versus Commissioner of Central Excise and Customs, Central Goods and Service Tax, Jaipur, Rajasthan

The Tribunal ruled in favor of the appellant, an authorized dealer, in a case concerning the levy of service tax on incentives and discount support ... Levy of Service Tax - Business Auxiliary Service - incentives and discount support received by the appellant - consideration for sales promotion activity for the manufacturer (TML) or not - period April, 2013 to June, 2017 - HELD THAT:- It is noticed that the appellant purchases vehicles from TML and sells the same to the buyers. It is clear from the agreement that the appellant works on principal to principal basis, and not as an agent of TML. This is for the reason that the agreement itself provides that the appellant has to undertake certain sales promotion activities as well. The carrying out of such activities by the appellant is for the mutual benefit of the business of the appellant, as well as the business of TML. The position in this regard is fairly settled as held by the Hon’ble Supreme Court in the matter of case of MOPED INDIA LIMITED VERSUS ASSISTANT COLLECTOR OF C. EX., NELLORE AND OTHERS [1985 (2) TMI 42 - SUPREME COURT].The amount of incentives and discount support received on such account cannot, therefore, be treated as consideration for any service. The incentives and discount support received by the appellant cannot, therefore, be leviable to service tax. The service tax on the amount received as incentives could not, therefore, have been levied to service tax - Appeal allowed - decided in favor of appellant. Issues:Levying service tax on incentives and discount support received by the authorized dealer from the manufacturer.Analysis:The appellant, an authorized dealer for trading vehicles, received incentives and discount support from the manufacturer, Tata Motors Ltd. The Department sought to levy service tax on these amounts under the category of 'Business Auxiliary Service.' The appellant argued that the amount received was trade receipts being discounts and thus excluded from the definition of 'service' under the service tax law. They contended that the transactions were on a principal-to-principal basis and not as a principal-agent. The appellant further argued that activities related to sales promotion by dealers cannot be considered as a service to the principal, as they are in their own interest. They also cited previous decisions in their favor, including a decision by the principal bench of the Tribunal in a similar matter.The Tribunal analyzed the agreement between the appellant and Tata Motors Ltd., noting that the appellant operated on a principal-to-principal basis and not as an agent of the manufacturer. The Tribunal referred to a Supreme Court case to support its finding that the incentives and discount support received by the appellant were not consideration for any service. The Tribunal also referenced a previous decision involving the same appellant to emphasize that discounts and incentives received by the appellant from the manufacturer could not be made liable for service tax under Business Auxiliary Service.The Tribunal highlighted that the appellant purchased vehicles from the manufacturer on a principal-to-principal basis and subsequently resold them, which did not justify levying service tax under Business Auxiliary Service. The Tribunal also addressed other miscellaneous income received by the appellant, clarifying that such amounts were not for providing services on behalf of the manufacturer. The Tribunal set aside the demand for service tax on commissions received by the appellant for facilitating insurance policies. Additionally, the Tribunal rejected the demand under the category of Goods Transport Agency service due to the absence of consignment notes.Furthermore, the Tribunal mentioned other cases where similar views were upheld, reinforcing the decision to set aside the demand for service tax on incentives and discount support. The Tribunal referred to an order by the Joint Commissioner in a related matter, where it was held that no service tax could be demanded on incentives in the form of trade discounts. Ultimately, the Tribunal concluded that the service tax on the incentives received by the appellant was not sustainable, setting aside the impugned order passed by the Commissioner and allowing the appeal.