2023 (10) TMI 810

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

..../- from the company through credit notes issued in respect of sale of tractors during the period October, 2008 to September, 2013. Though the appellant explained that the amount received from the company was towards the sales incentives and not sales commission, but this explanation offered by the appellant did not find favour of the department and a show cause notice dated 21.04.2014 was issued to the appellant alleging that it had received sales commission in the guise of dealer incentives but had not paid service tax under the category of "business auxiliary service" 4. The appellant filed a reply to the show cause notice denying the allegations made therein and again contended that what had been received by the appellant from the company was dealer incentives and not sales commission. 5. The Commissioner, however, by the aforesaid order dated 05.01.2015 confirmed the demand. The Commissioner noticed that as the appellant had received payments in advance and the company had reserved rights of an "unpaid sellers", it would mean that the relationship was not on a principal to principal basis for what actually existed was a relationship of a principal and an agent. The Commis....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... agreement. 12. Clause 1 of the agreement deals with 'grant of non-exclusive rights' and it is reproduced below; 1. GRANT OF NON-EXCLUSIVE RIGHTS: The Company grants to the Dealer a non-exclusive right during the continuance of this agreement to purchase for re-sale, within the territory described in Schedule-I hereto (hereinafter called "the territory") such of the Company's products as are mentioned in the Schedule-II hereto (hereinafter called "the products") on the terms and conditions hereinafter contained, it being clearly understood that the Company shall have the liberty to grant the right to any other person/ persons to sell the products of the Company in the territory or any part thereof and further that the Company shall also have the right to sell its products directly to the customers in the territory. 13. Clause 3 deals with 'placing of orders, prices' and it is reproduced below: 3. PLACING OF ORDERS, PRICES: The dealer will place orders with the Company for acceptance covering their requirements for such period of time as the Company may designate and the Company shall sell the products to the Dealer in accordance with the or....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....the right, in the event of the Dealer failing to make payment in the agreed manner, invoke the Bank Guarantee and also divert the products to another destination and in such an event the Dealer shall pay the demurrage, freight, storage and all other expenses incurred as a result of such failure of the Dealer to pay. This right of Company is in addition to any rights the Company would otherwise have and not in substitution of any such rights. In the event that the Company shall, at any time, have an obligation to make any payment to the Dealer, it may set off and/or reduce such obligation by an amount due by the Dealer to the Company. While advance payment is a condition precedent for the supplies made by the Company, in the event of supplies made without receiving such advance payment, Dealer shall immediately on such supplies being effected, shall make the requisite full payment to the company, failing which the Company shall have the right to take back the products or divert the products to another destination/dealer and in such an event, the Dealer shall pay the demurrage, freight, storage charges and all other expenses incurred by the Company. The Company shall also ha....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....a) SUPPLY CATALOGUE ETC.: Supply the Dealer with promotional materials as it considers reasonably sufficient with a view to promoting sales of the products and of instruction books, technical pamphlets, catalogues as it considers necessary with a view to providing and promoting such after-sales-service as it considers appropriate. The Company shall also supply additional material, if so required to the Dealer at their cost. (b) INSTRUCTION COURSES FOR DEALER'S EMPLOYEES: Provide such courses of instruction at intervals considered appropriate by the Company to employees and agents of the Dealer in provision of proper after-sales-service. 26. LEGAL RELATIONSHIP: The Dealer shall not be construed as the agents of the Company for any purpose. The transactions between the Company and the Dealer shall be on Principal to Principal basis with the Company being the Seller and the Dealer the purchaser of the products. The Dealer has no right or authority to assign or create any obligation of any kind, express or implied, on behalf of the Company to bind the Company in any way, to accept any service or process upon the Company or to receive any not....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....their books of accounts as "miscellaneous income‟. During the course of audit of the books of accounts of the appellant, the Department noticed such Misc. income and took the view that such amounts received by the appellant from MUL are consideration towards promotion and marketing of the vehicles manufactured by MUL and such consideration is liable for payment of Service Tax under the category of Business Auxiliary Service. By taking the above view, show cause notice dated 17.10.2011 was issued covering the period 01.04.2006 to 31.03.2011. Further, show cause notice dated 09.10.2012 was issued covering the period 01.04.2007 to 31.03.2012. The proceedings initiated under the above show cause notices resulted in the issue of two impugned orders, which are under challenge in the present appeals. Since the issue involved is common, these appeals are disposing of with this common order. 3. The demands have been raised by Revenue through the two impugned orders covering overlapping periods. Demand has been made under the category of Business Auxiliary Service for the amounts received by the appellant from M/s. MUL. Such amounts have been received towards incentives/discou....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... in the present cannot be permitted to take a different view. The service tax on the amount received form incentives could not, therefore, have been levied to service tax." 22. Thus, for both the pre-negative period and the post negative period the issue stands decided in favour of the appellant by the two decisions of the Tribunal in Rohan Motors. 23. In any view of the matter, the appellant cannot be termed as an agent of the company. The Commissioner was, therefore, not justified in holding that the appellant had received commission which would be subject to the levy of service tax. 24. In this connection, reference can also be made to the decision of Gujarat High Court in Ahmedabad Stamp Vendors Association vs. Union of India [MANU/GJ/0900/2002], wherein the High Court drew a distinction between 'commission' and 'discount' and the relevant portion of the judgment is reproduced below: "10. In Harihar Cotton Pressing Factory vs. CITMANU/MH/0014/1960 : [1960] 39ITR594 (Bom), the Bombay High Court explained the distinction between the two expressions as under: "The expression 'commission' has no technical meaning but both in legal and commercial a....