2026 (2) TMI 1338 - AT - Service Tax

Commercial discounts are adjustments to sale consideration, not service consideration; therefore not taxable as Business Auxiliary Service.

Commercial incentives or year-end discounts credited by a vehicle manufacturer to an authorised dealer arising from a purchase-resale ... Liability to pay Service tax - incentives/discounts received by an authorised vehicle dealer from the manufacturer - consideration for provision of service - Business Auxiliary Service - principal-to-principal sale transaction - declared service - HELD THAT:- The issue involved in the present appeal is about service tax demand from the authorized dealers of the vehicle manufacture, on the incentives / discounts received by the appellant from manufacturer, i.e. TML. The amount of the incentives / discounts received by the appellants during the period from 01.01.2014 to 30.06.2017 amounting to Rs. 1,92,26,093/- has been alleged as taxable under Section 65B(51) of the Finance Act, 1994. However, it has fairly been conceded that the said issue stands already decided in the several decisions of the Tribunal wherein it was concluded that the incentives / discounts received by the appellants / dealers of car manufacturer were not taxable under BAS, as they were the part of a business transaction on a principal-to-principal basis. We are of the considered view that the amount of incentives and discounts cannot be treated as consideration for any service and therefore no Service Tax is leviable thereon. Having decided the issue on merits in favour of the assessee, it is no longer required to go into the question of limitation raised by the appellant. The impugned order is, therefore, set aside and the appeals are allowed accordingly. Issues: Whether the incentives/discounts received by an authorised vehicle dealer from the manufacturer constitute consideration for provision of services taxable as Business Auxiliary Service under the Finance Act, 1994.Analysis: The appeals concern discounts/incentives credited by the vehicle manufacturer to the dealer which arose from their purchase-resale commercial relationship. The Tribunal's earlier decisions and subsequent CESTAT precedents treat such incentives as adjustments to the sale transaction between principal parties rather than payments for services. Where vehicles are purchased from the manufacturer on a principal-to-principal basis and resold to customers, year-end or performance-linked discounts granted by the manufacturer reduce the sale consideration and are part of the sale transaction. The amounts recorded as miscellaneous income in dealer accounts do not, in that factual matrix, represent remuneration for rendering business support or promotional services to the manufacturer and thus do not fall within the ambit of Business Auxiliary Service or declared services under the Finance Act, 1994. In light of these authorities and the principal-to-principal commercial arrangement, the incentives/discounts cannot be taxed as service consideration under the statutory provisions invoked by Revenue.Conclusion: The discounts/incentives received from the manufacturer are not consideration for any service and therefore are not taxable under Business Auxiliary Service; the impugned demand is set aside and the appeals are allowed in favour of the assessee.