TaxTMI 
TaxTMI 
2023 (6) TMI 995
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction 65 (105) of the Finance Act, 1994. 2.2. The appellants are engaged in sale and purchase of motor cars of M/s. Maruti Suzuki India Ltd., (MSIL) under the brand name "Maruti", since March 2007. They are also running 'authorised service station' for Maruti vehicles sold by them and also for the vehicles sold by other dealers in India. They have rented out some portion of the premises on lease. On scrutiny of the appellant's records during an Audit conducted by the Department, as well as on the basis of Audit report No.59/2012-13 (Para1) dated 04.05.2012 and the ST Returns filed, it appeared that the appellants had short paid service tax during the period 2007-2008 (October, 2007 to March, 2008) to 2012-2013 (upto June, 2012). Accordingly, show cause notice proceedings were initiated by the Department demanding service tax along with interest and penalty vide Show Cause-Cum-Demand Notice No.53/ST/Gr.VII/COMMR./ ADJ/2013 dated 22.4. 2013. Upon consideration of the reply of the appellant dated 9.7.2013 and after giving personal hearing to the appellant on 05.09.2013, the Commissioner adjudicated the case confirming the adjudged demands of service tax besides im....
X X X X Extracts X X X X
X X X X Extracts X X X X
....chment might be involved in any refund claim. Nevertheless, the appellant has to be given due credit for the payments already made. Inasmuch as this has not been done, the matter has to go back to the Adjudicating Authority for recomputation of the correct service tax demand." Accordingly, the Pr. Commissioner in his de novo proceedings had recalculated the service tax liability on 'Renting of immovable properties', duly taking into account the total service tax payable of Rs. 30,49,699/- for the period 2007-2008 to 2012-2013 (Upto June, 2012) and the actual service tax paid by the appellants for Rs.28,18,156/- in 39 nos. of GAR-7 challans, and finally arrived at the amount of service tax short paid as Rs.2,37,553/-. 2.5. Similarly the Tribunal in its order 04.02.2015, had given its findings in respect of the service tax liability on 'Authorised to Service Station' as follows: "5.2. Similarly, in respect of demand under the taxable service category of 'Authorised Service Station', here also we find that the appellant has discharged part of the service tax liability through Cenvat credit account and part in cash. However, due credit for these payments have not b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....service rendered. This is a verifiable fact and the appellant has to lead evidence in support of the how the income has originated and corresponding bills/invoices issued towards this income. The main dispute relates to incentive received from Maruti Suzuki Ltd. The appellants claim is that this income is nothing but trade discount received by them which is in the nature of quantity discount and has been passed on to the appellant by Maruti Suzuki Ltd. by way of credit notes. It is also the submission that the credit notes indicate the period to which the discount relates and the corresponding discount circular issued by Maruti Suzuki Ltd. It is also submitted that they have made correspondence with the Maruti Suzuki Ltd. which would clearly indicate that the amount, even though described as incentive, is in fact a trade discount. However, it is clearly submitted that the correspondence with Maruti Suzuki Ltd. were not furnished before the Adjudicating Authority at the time of adjudication. Therefore, the appellant should be given a fair opportunity of producing these documents to satisfy the Adjudicating Authority with respect to their contention that these are nothing but trade d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and it should be taxed proportionately at the end of both original manufacturer and the dealer. The Principal Commissioner also came to the conclusion that most of the schemes, discounts, incentives (such as cash back incentive scheme for retail target achievement, RMK claim, ISL claim, Exchange bonus, RIPS incentive on SX4 model, incentive scheme of GM&TL for model SX4 etc.) have specific objectives. Hence, it appeared to him that M/s MSIL had paid such consideration to the appellants with the objective of promoting the sale of their products through the dealer. Thus he concluded that the incentives earned by the appellants are nothing but commission earned for performing tasks beyond the scope of a dealer. On the basis such discussions, he finally concluded that the discounts are meant to incentivize the performance of the dealer for carrying out specific tasks well beyond the scope of normal dealer. Accordingly, he calculated the amount of service tax payable on business actually services as Rs.1,29,32,934/- in the impugned order. 2.7. On the above basis, the Pr. Commissioner, in the impugned order dt. 19.01.2016 had re-computed the service tax liability on the foll....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t register. We find that this exercise was carried over in the impugned order and the recalculated amount in respect of 'Renting of immovable properties' services as Rs.2,37,553/- and 'Authorised Service Station' services as Rs. 3,77,161/- is acceptable to the appellants and they are not contesting the demand of service tax on the above two aspects. Accordingly, we find that there is no need for us to further examine on the above two issues. 5.3. Further, in respect of service tax liability on 'Business Auxiliary Services', the matter was sent for de novo proceedings to take into consideration the various contentions raised by the appellants and to pass a reasoned order, after giving reasonable opportunity of personal hearing to the appellants. Accordingly, the impugned order re-determined the amount of service tax payable on business actually services as Rs.1,29,32,934/-. However, we find that such recalculated amount of service tax payable on business auxiliary services were not acceptable to the appellants and they had contended this demand in this appeal before the Tribunal. Thus, we take up this issue for our detailed examination. 6.1. Section 65(19) of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the taxable service in respect of the above service as follows: "Taxable Service" means any service provided or to be provided, to a client by any person in relation to business auxiliary service. The findings of the learned Principal Commissioner concludes that various incentives/commission received by the appellant from M/s MSIL are for the services rendered to them in connection with sales promotion/marketing of the vehicles manufactured by them as discussed in detail in impugned order and as briefly stated in para 2.6 above and recalculates the service tax payable by the appellant. 6.2. We find that the relevant sub-clause invoked in the impugned order is relating to "(i) promotion or marketing or sale of goods produced or provided by or belonging to the client". From the discussion in impugned order at para 22.05.05 with illustrated invoice, it is very clear that M/s MSIL is the manufacturer of car and they sell the car to the appellants under an invoice indicating the assessable value and various components of additions and deductions with Net invoice value for such sale. Subsequently, when the appellant is able to sell the car to the ultimate customer, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vice tax. This aspect has been explained in the CBIC Circular No. 87/05/2006-ST dated 6.11.2006 as follows: "Circular No. 87/05/2006-S.T., dated 6-11-2006 F. No. 137/128/2006-CX. 4 Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi *** Subject : Service tax issues relating to authorized motor vehicle dealers and service stations - Reg. It has been brought to the notice of the Board that certain doubts have arisen in respect to activities undertaken by authorized motor vehicle dealers and service stations. The issues are as mentioned below:- (a) Whether the mark-up (profit) on the spare parts sold by a service station during the servicing of vehicles is liable to payment of service tax? (b) Whether exemption can be claimed on the cost of consumables that get consumed during the course of providing service? (c) Whether 'free services' given by the authorized dealers (for which they are reimbursed by the vehicle manufacturers) are subjected to service tax? (d) Whether the commission received by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax is payable on the gross commission received by the automobile dealer. In some cases, the dealers share part of their commission with their customers to attract them. However, this is an independent transaction between the automobile dealer and the purchaser of the vehicle, and does not involve the service rendered by the automobile dealer to the finance company. Therefore, the tax payable by the dealer would be on the gross amount received from the financial company and not on the balance amount, i.e., after excluding the amount that he passes on to the customer. 5. As regards the applicability of service tax on the activity of servicing /repairing of the commercial vehicles, it is clarified that as regards 'authorized service stations', the taxable service, means any service provided or to be provided, to a customer, by an authorized service station, in relation to any service, repair, reconditioning or restoration of motor cars, light motor vehicles or two wheeled motor vehicles, in any manner. Further, a 'light motor vehicle' means any motor vehicle constructed or adapted to carry more than six messengers, but not more than twelve passengers, excluding driver. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nufacturer. These targets are as per the circular issued by MUL. Hence these cannot be treated as business auxiliary service. ... 18. In respect of sales/target incentive, the Revenue wants to tax this activity under the category of business auxiliary service. We have gone through the circular issued by MUL which provides certain incentives in respect of cars sold by the assessee-respondent. These incentives are in the form of trade discount. In these circumstances, we find no infirmity in the adjudication order whereby the adjudicating authority dropped the demand. Hence, the appeal filed by the Revenue has no merit." We further find that this case was appealed before the Hon'ble Supreme Court in Civil Appeal No(s). 690-691 of 2015 and the Apex Court had ordered for remand of the matter to the Tribunal for afresh consideration only of the issue of penalty on the appellant, as the same has not been considered in spite of rectification of mistake application having been filed. 6.4. Further, in the case of Commissioner of Service Tax, Mumbai Vs. Jaybharat Automobiles Limited 2016 (41) S.T.R. 311 (Tri.-Mumbai), the Tribunal has held as follows: "....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arges collected from customers for registration of vehicles and commission foregone on loans marketed by appellant to customers. It is the contention of the appellant that these are not consideration leviable to tax and that, even if these are, the adjudicating authority has erred in computing the tax liability. As the issues in the two appeals are common, we dispose both by a common order. 3. Appellant contends that Rs. 81,35,813/- and Rs. 1,21,47,133/- for the two periods has been wrongly subjected to tax because the agreement between the appellant and M/s. Toyota Kirloskar Motor Limited is one of supply of vehicles by the latter on 'principal-to-principal' basis on which title and risk, as per Agreement, are passed on to appellant when the vehicles are excise cleared and placed on common carrier. Depending on order quantity, the manufacturer raises invoices after according discounts which are designated as commission/incentive merely as a management terminology. Learned Chartered Accountant for appellant places reliance in the decisions of the Tribunal in Jaybharat Automobiles Limited v. Commissioner of Service Tax, Mumbai [2015-TIOL-1570CESTAT-MUM = 2016 (41) S.T....