TaxTMI 
TaxTMI 
2024 (4) TMI 66
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....vehicles of Tata and Hyundai Brand from their various automobile service centers situated at different places under the tradename of 'Kamal Motors'. The appellants were also providing trucks on hire basis to various Goods Transport Agencies (GTA) for transportation of goods. Besides these activities, the appellants were also engaged in trading of 'tyers and cement' under the name and style of 'Bindhiya Trading Company (BTC)'. For the purpose of payment of service tax on taxable services the appellants had registered separately for various locations of their business with the jurisdictional Service Tax Commissionerate. 2.2 During the course of EA 2000 Audit conducted by the Department in September, 2015 covering the activities of the appellants for the financial years 2011-2012 to 2014-2015, it was noticed by the department that they were providing taxable services as well as exempted services; they had availed Cenvat credit on common input services within each of the registered locations, which in certain cases the credit was foregone and had also reversed certain amount of Cenvat credit taken on common inputs which the audit identified to be as violative of Rule 6 (3A) of Cenvat ....
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....es in relation to business promotion activities provided/rendered in the course of business activities falls under the 'Business Auxiliary Services' (BAS) services as defined under Section 65 (19) read with Section 65(105) (zzb) ibid; (iii) whether the services involved in 'servicing of vehicles' during the 'free warranty' period provided/rendered during the course of its business activities falls under the 'Authorised Service Station' services as defined under Section 65 (62) (72) & (73) read with Section 65(105) (zo) ibid; (iv) whether the method adopted by the appellants assessee by foregoing certain amount of Cenvat credit in respect of provision of exempted service is correct in terms of provisions of Rule 6(3A) of CCR, 2004; and (v) whether penalty is impossible on appearance under Section 77, 78/76 ibid. Upon examination of each of the above issues, the learned Commissioner had decided these issues by confirmation of the service tax demands along with imposition of penalty, with the exception of dropping the demand raised in respect of the issue of taxability of services in relation to vehicles provided to its associates in the SCN dated 13.10.2016 by holding that the....
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....cable VAT and there are no services involved in these sales of vehicles. 3.2 Learned Advocate also stated that the appellants also incur various expenses, jointly by dealers and manufacturers, for promotion of sales of vehicles and such expenses are shared among them in agreed ratio. Further, while arranging loan for purchase of vehicles by customers through banks / financial institutions certain amount was offered as interest subvention, by reimbursement from manufacturers to the appellants, to the benefit of ultimate customers. Further, every sale of new vehicles is provided with free services during the warrant period as a part of standard sale arrangement and the value of such services are embedded in the selling price of vehicles. Thus, these transactions are not in the nature of service but is a sale which is subject to State VAT. As regards reversal of Cenvat credit, he stated that the appellants render no services in the premises dealing with sale of vehicles and hence there is no common inputs or input services requiring reversal of Cenvat credit; the appellants had taken Cenvat credit only at workshops where the activity of maintenance and repair services have been carri....
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....ummarized at paragraph 2.3 above. The period of dispute in this case relates to 01.04.2011 to 30.06.2017. In order to examine in detail, the facts and legal position on each of the above issues, we would firstly like to refer to the relevant legal provisions under the Finance Act, 1994 as follows: "Finance Act, 1994 65. (105) "taxable service" means any service provided or to be provided,- (a) .... xx xx xx xx xx (zo) to any person, by any other person, in relation to any service for repair, reconditioning, restoration or decoration or any other similar services, of any motor vehicle other than three wheeler scooter auto-rickshaw and motor vehicle meant for goods carriage; xx xx xx xx xx (zzb) to a client, by any person in relation to business auxiliary service; xx xx xx xx xx (zzzq) to any person, by any other person, in relation to support services of business or commerce, in any manner; xx xx xx &....
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....ation and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, 1[operational or administrative assistance in any manner], formulation of customer service and pricing policies, infrastructural support services and other transaction processing" 65. (62) "light motor vehicle" means any motor vehicle constructed or adapted to carry more than six passengers, but not more than twelve passengers, excluding the driver;" 65. (72) "motor car" has the meaning assigned to it in clause (26) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988); 1 Substituted for "operational assistance for marketing" by the Finance Act, 2011, w.e.f. 01.05.2011. 65. (73) "motor vehicle" has the meaning assigned to it in clause (28) of section 2 of the Motor Vehicles Act, 1988 (59 of 1988); 65. (9) 2"authorised service station" means any service station, or centre, authorised by any motor vehicle manufacturer, to out any service, repair, reconditioning or restoration of any motor car, light motor vehicles or two wheeled motor vehicles manufactured by such manufacturer;" Interpretations.....
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....ny kind, in any other manner, in accordance with the provisions of the Lotteries (Regulation) Act, 1998 (17 of 1998); (b) by a foreman of chit fund for conducting or organising a chit in any manner. 2Omitted by the Finance Act, 2011, w.e.f. 1-5-2011. Explanation 3.- For the purposes of this Chapter,- (a) an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons; (b) an establishment of a person in the taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons. Explanation 4.- A person carrying on a business through a branch or agency or representational office in any territory shall be treated as having an establishment in that territory;" 6.2. From plain reading of the above legal provisions, it transpires that for the disputed period relating to the pre-negative list regime i.e., prior to 01.07.2012, the taxability was determined in terms of coverage of an activity under the service tax net by defining taxable services under Section 65(105) ibid, which enumerated each of the specified services. However,....
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....e category of Business Auxiliary Services and is subject to payment of service tax. Held accordingly." (B)(ii) Amount of sale consideration received from the principal for the sale price of vehicle whether amounts to subvention: (page 60 of impugned order) "In view of the decision of the Hon'ble CESTAT, WZB, Mumbai in the case of M/s Tata Motors Ltd. in Appeal Nos. E/1362 to 1365/2012 vide Order dated 25.03.2014 and the case of M/s HDFC Bank Ltd. in Service Tax Appeal No.85741 of 2014 vide Order dated 13.09.2019, as discussed above, I hold that the said service/business promotion rendered to Tata Motors falls under the category of Business Auxiliary Services and is subject to payment of service tax. Held accordingly." (B)(iii) other ethical as per row 'N' of para 2 of SCN whether falls under business axillary services: (page 61 of impugned order) "...In the absence of any reconciliation statement/clarification from the assessee, I am inclined to hold that the same pertains to amount applicable to service tax and service tax is payable by them on the same. Held accordingly." (C) Servicing of vehicles during the 'free warranty' period provided/ rendered during the cour....
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....d that the various schemes under which the discount/incentives were received by the appellants from the manufacturer of motor vehicles by way of credit notes, were essentially in the nature of schemes conceptualized by such manufacturer wherein the discount given to the ultimate consumer is borne by both the manufacturer and the appellants dealer. As per such schemes, the appellants had forwarded to the manufacturer the proposal of discount to be given to the ultimate consumer, for their consideration and approval. Upon receipt of the approval from the manufacturer, the vehicles were sold by the appellant to the customer by extending the discounts. Hence, we find that the net sale price of the vehicles have been reduced to the ultimate purchaser of the vehicle extending the above discounts. Further, we also find that under target-based schemes, the discount/incentives is offered to the appellants dealer when they achieve particular target in terms of quantity of sales, or value of sales as per various schemes introduced by the manufacturers. The discounts offered in the above manner by issue of credit note also amount to reduction in purchase price of the individual vehicles which ....
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.... case before us, as evident from paragraph 5.14 of the said Order, which is extracted below: "5.14 Dealership Agreement M/s. TML has submitted on record one Representative Dealership Agreement dated 15-11-2007 with M/s. Concorde Motors India Limited. On a perusal of this agreement, it is seen that it does not provide for any kind of discount to the dealer(s) on sale of its cars, namely, Tata Indica, Tata Indigo etc. From this, it is evident that there was no policy/established practice for grant of discount on sale of its cars in the agreement entered into with the dealers." Further, we also find that the invoice for sale of vehicle issued by manufacturer of vehicles to appellants indicate the special discounts offered by them which in turn have been reflected in the tax invoices issued by the appellants. Whereas in the case of Tata Motors referred by the learned Commissioner, there was also no evidence on record to show that the goods on which the discounts were given while effecting sales to the dealers were passed on to the customers, that is, buyers of the cars. There was also a case of false/fabricated circulars claimed to have been issued to the dealers, the receipt of....
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....he incentive on account of sales/target incentive, incentive on sale of vehicles and incentive on sale of spare parts for promoting and marketing the products of MUL, the contention is that these incentives are in the form of trade discount. The assessee respondent is the authorized dealer of car manufactured by MUL and are getting certain incentives in respect of sale target set out by the manufacturer. These targets are as per the circular issued by MUL. Hence these cannot be treated as business auxiliary service." Similarly in the case of My Car Pvt. Ltd. Vs. Commissioner of Central Excise, Kanpur (supra), the Tribunal has held that various incentives offered by the manufacturer cannot be treated as Business Auxiliary Service. The relevant paragraph is extracted and given below: "...(iv) For incentive on spare parts it is the case of the appellant that these incentives are given to the appellant for achieving certain targets of purchase of spare parts which is purely an activity of buying and selling on which local VAT is paid at the time of sale. Appellant strongly argued that such an incentive is only a trade discount based on performance. Appellant has relied upon t....
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....l agents when they achieve a pre-determined target of sales. 74. The relevant portion of Section 67 of the Finance Act, on which reliance has been placed by Learned Counsel for the appellant, is reproduced below :- "67. (1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall, - (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner." (emphasis supplied) 75. Section 67 of the Act deals with valuation of taxable services for charging service tax. Sub-section (1) of Section 67 provides that where service tax is chargeable on any taxable service with reference to its value....
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....ot in relation to a particular supply. The relevant portion of the decision of the Federal Court is reproduced below :- "17. Insofar as the Ford "retail target incentive" payments are concerned, Ford agreed with its dealers to pay certain sums of money to dealers which achieved monthly and quarterly sales targets that Ford set based on the dealer's size and past performance. Targets were based on the number of cars sold to eligible customers in the qualifying period, not the value of the cars sold. Once a car was sold and delivered to an eligible customer the details would be entered into the vehicle information system and, in about the middle of the following month, based on the information so entered Ford would issue the dealer with a tax invoice for the incentive payment plus 10% GST and shortly thereafter pay that amount to the dealer. 30. The Tribunal reached a different view about the Ford "retail target incentive" payments. It reasoned as follows at [I06]-[I08] : I06. The last remaining payment type is Ford's retail target incentive payment. It is clear from the "Drive for Success" program that the payment is triggered at the time, and by reason, of the Applican....
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....e can also be made to the decision of this Tribunal in Rohan Motors Limited v. Commissioner of Central Excise, Dehradun [2020 (12) TMI 1014-CESTAT NEW DELHI]. The Tribunal held that incentives are not leviable to service tax. The relevant paragraph is reproduced below :- 9. The first issue that arises for consideration is whether service tax would be leviable on incentives prior to July, 2012. 10. As noticed above, the appellant purchases vehicles from MUL and sells the same to the buyers. It is clear from the agreement that the appellant works on a principal to principal basis and not as an agent of MUL. 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 MUL. The amount of incentives received on such account cannot, therefore, be treated as consideration for any service. The incentives received by the appellant cannot, therefore, be leviable to service tax. (emphasis supplied) 80. It, therefore, clearly transpires from the aforesaid decisions that....
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....nience such payment has been routed through the Appellant under the pass through mechanism. The Participating Group Companies have authorized the Appellant to procure the services. Such authorization has been executed in the form of contractual agreement between the Appellant and Participating Group Companies. Participating Group Companies are completely aware of the fact that the services are procured from the third party vendors or services providers and the Appellant is only facilitating the provision of such Services. The invoice issued by the Appellant categorically specifies that the Appellant recovers only the amount that is being paid to the third party on behalf of the Participating Group Companies. The amount recovered by the Appellant from the Participating Group Companies is precisely the same as has been paid by the Appellant to the third party vendors/service providers. The goods or services procured by the Appellant for the use of Participating Group Companies are not availed by the Appellant for its own use or consumption, and the Appellant has no function or existence other than as Trustee/Manager (agent) of the Participating Group Companies cost sharing arrangemen....
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....rated 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, then a separate invoice is being raised by the appellant and on which applicable VAT/Sales Tax is payable. Hence, the nature of transaction in the case is principal-to-principal basis. Further, in order to subject a particular activity of the appellant for the levy of service tax, it has to satisfy the various elements of taxable service i.e., (i) there shall be a service provider and a service receiver/client (ii) a service is required to be provided by the appellant to a client (iii) such service shall be in relation to business auxiliary services. In this transaction we find that firstly the sale of cars takes place from the manufacturer to the appellant-car dealer. Depending upon the various factors weighed upon by an individual end consumer, he purchases particular car/vehicle. In this process of sale of car, the appellant undertakes various activit....
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....he 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 the automobile dealers from Banks/Non Banking Financial Companies (NBFC), for introducing the customers seeking finances/loans to such banks/NBFCs is to be subjected to service tax? Further, in case part of these incentives are passed on by the dealers to the customers, whether tax would be leviable (b) only on that part of incentive, which is retained by the dealers or whether it would be on full amount? (e) Whether service tax is chargeable on the amounts received for servicing/repair of the commercial vehicles? 2. The issues have been examined. As regards, the issue relating to sale of spare parts and consumables, Notification No. 12/2003-S.T., dated 20-62003, exempts service tax to the extent of value of the goods and materials sold by the service provider to the service recipient, if documentary proof of such sale exists and no credit of excise duty paid on such spares or consumables have been taken. It may, however be pertinent to note....
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....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. Similarly, as per the 'Motor Vehicle Act', a 'motor car means any motor vehicle other than a transport vehicles, omnibus, roadroller, tractor, motor cycle or invalid carriage'. In other words, servicing, repair, reconditioning or restoration of specified types of vehicles (whether they are used for commercial purposes or not) fall under the category of taxable services. However, servicing of vehicles like trucks is not within the ambit of service tax. 6. Trade and filed formations may be advised accordingly. 7. Hindi version will follow." It can be seen from the above clarification issued by CBIC, that the discount/commission/incentives given for sale of cars in the case before us, is no way comparable to services provided to customers at "free of charge" for which reimbursement are given by the car manufacturer. Similarly, this is not the case where the appellant is advising the end customers to buy the cars supplied by the manufacturer amongst various....
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....in the case of Commissioner of Service Tax, Mumbai v. Jaybharat Automobiles Limited 2016 (41) S.T.R. 311 (Tri.-Mumbai), the Tribunal has held as follows: "6.5 On the appeal by Revenue on the issue of incentives received by the appellant from the car dealer, we find that the relationship between the appellant and the dealer is on a principal to principal basis. Only because some incentives/discounts are received by the appellant under various schemes of the manufacturer cannot lead to the conclusion that the incentive is received for promotion and marketing of goods. It is not material under what head the incentives are shown in the Ledgers, what is relevant is the nature of the transaction which is of sale. All manufacturers provide discount schemes to dealers. Such transactions cannot fall under the service category of Business Auxiliary Service when it is a normal market practice to offer discounts/institutions to the dealers. The issue is settled in the case of Sai Service Station (supra). Therefore, we reject the appeal of the department." 6.5 Also, in the case of Toyota Lakozy Auto Private Limited v. Commissioner of Service Tax & Central Excise, Mumbai-II & V 2017 (52) S.....
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....ibunal in Jaybharat Automobiles Limited v. Commissioner of Service Tax, Mumbai [2015-TIOL-1570-CESTATMUM = 2016 (41) S.T.R. 311 (Tri.)], Sai Service Station Limited v. Commissioner of Service Tax, Mumbai [2013-TIOL-1436- CESTAT-MUM = 2014 (35) S.T.R. 625 (Tri.)], Tradex Polymers Private Limited v. Commissioner of Service Tax, Ahmedabad [2014 (34) S.T.R. 416 (Tri.-Ahmd.)] and Garrisson Polysacks Private Ltd. v. Commissioner of Service Tax, Vadodara [2015 (39) S.T.R. 487 (Tri.-Ahmd.)]. In re Jaybharat Automobiles Limited, the Tribunal held that "6.5 On the appeal by Revenue on the issue of incentives received by the appellant from the car dealer, we find that the relationship between the appellant and the dealer is on a principal to principal basis. ...... The issue is settled in the case of Sai Service Station (supra). Therefore, we reject the appeal of the department." and in re Sai Service Station Limited it was held that "14. In respect of the incentive on account of sales/target incentive, incentive on sale of vehicles and incentive on sale of spare parts for promoting and marketing the products of MUL, the contention is that these incentives are in the form of trade....
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....6-17 submitted by the Deputy Commissioner, Service Tax Audit-III, Mumbai, it has been specifically mentioned that the during the course of audit, the Audit wing had observed that the appellants had maintained CENVAT registers as per Service Tax registrations obtained for various premises. The Audit wing had also observed that the appellants had not availed Cenvat credit on inputs services which have been utilized only for exempted services; however, Cenvat credit has been availed common input services within each of the registered location. It is also explained by the appellants that they had not obtained service tax registration in respect of two premises, since no service is rendered in these places and they only undertake trading of vehicles for which they are discharging appropriate VAT before the jurisdictional Sales Tax Authorities. Further, the details submitted by the appellants indicate that they have already reversed the Cenvat credit on input services availed at locations from where both service of vehicles and sale of spare parts was carried out to the tune of Rs.17,68,172/- and the same has been disclosed to the Department. In this regard, we also find that the impugne....