TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 212
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....mbursements', earned during the period 01.04.2014 to 30.06.2017 along with interest and also imposed penalty of Rs. 2,12,66,627/- under Section 78 and Rs. 10,000/- under Section 77 (2) of the Finance Act, 1994. She also imposed a penalty of Rs. 1,00,000/- upon Shri Prajesh Manubhai Patel, Accounts Manager of the appellant under Section 78A of the Finance Act, 1994. 1.1 Appeal Nos. ST/10861/2020 and ST/10852/2020 have been preferred by the Revenue feeling aggrieved from the impugned Order-in-Appeal dated 14.08.2020 wherein appeals preferred by both the Respondents Downtown Motors Pvt Ltd and Shri Prajesh Manubhai Patel were allowed and demand of Service Tax and penalties were dropped. 1.2 M/s. Downtown Motors Private Limited, (main appellant), are an authorised car dealer of Hyundai Motor India Limited (HMIL) and are engaged in the business of trading of Hyundai brand cars & spare parts. Intelligence was received by the office of the Director General of GST Intelligence (DGGI) Regional Unit, Vadodara indicating that car dealers were receiving incentives and additional discounts from manufacturers but are not paying Service Tax thereon. They conducted investigations by calling ....
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....s which are consideration for provision of service and hence, taxable with effect from 01.07.2012. Accordingly, she held that Downtown Motors have provided declared services during the period April-2014 to June- 2017 and confirmed the demand of Service Tax including cess amounting to Rs. 2,12,66,627/- along with interest and also imposed penalty upon Downtown Motors as well as on the Accounts Manager against which appeal no. 10406/2020 and 10410/2020 have been filed by appellant and their Account Manager. 1.4 The appeal Nos. ST/10852/2020 & ST/10861/2020 filed by Principal Commissioner is against order of Commissioner (Appeals) wherein he had held that income from "Trade Discount" & "Sales Claim Reimbursements" are not covered in the definition of Service and are not chargeable to Service Tax. Accordingly, he set aside the demand of Service Tax, interest on it and penalties imposed on company and their Account Manager and allowed the appeals. Hence, appeals by the Revenue against both. 2. The learned Counsel for the appellants submitted that the impugned order passed by the learned Principal Commissioner cannot be sustained because it has been passed under a mistaken belief t....
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.... Limited - 2024 (4) TMI 66-CESTAT MUMBAI h. Vipul Motors P. Ltd. - 2025 (7) TMI 215-CESTAT NEW DELHI i. Comet Car Sales P. Ltd. - 2024 (11) TMI 667-CESTAT AHMEDABAD j. Shri Ambica Auto Sales & Services - 2024 (10) TMI 901 - CESTAT AHMEDABAD k. Shivalik IB Authogem Private Limited - Final Order No. 12157- 12158/2024 dated 24.09.2024. 2.2 The learned Counsel for the appellant also submitted that the Larger Bench of CESTAT in the case of Kafila Hospitality & Travels P. Ltd 2021 (47) G.S.T.L. 140 (Tri. LB) dealt with the issue, 'whether service tax can be levied under the category of 'Business Auxiliary Service on target based incentives paid to the travel agents by the Airlines as they were promoting and marketing the business of the Airlines. The Larger Bench took the view that it is not a case where the Air Travel Agent is promoting the service of the Airlines rather by sale of airlines ticket, he was ensuring promotion of its own business even though this may lead to incidental promotion of the business of the Airlines. On the issue, whether 'incentive' paid for achieving target are taxable, the Tribunal analyzed the scope of the t....
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....akh penalty alone, is not maintainable due to litigation policy. It has been prayed that the Appeal filed by the Appellant must be allowed and the appeal filed by Revenue must be dismissed. 3. The learned Authorised Representative reiterated the impugned order passed by the learned Principal Commissioner and submitted that in respect of reimbursement of discount to be passed on to Customer, once car is purchased by the appellant company from HMIL, the purchase / sale transaction of is over. Activity of passing on certain amount as discount at the instance of HMIL and it's reimbursement by them does not come under the definition of 'sale' but can be termed as service. The appellant was bound to do it as it agreed to an act on behalf of Hyundai Motors. 3.1 The learned AR also submitted that in respect of target linked incentives scheme, such incentives are not passed on to the customers. The appellant gets paid by the manufacturer in the form of incentive for the simple reason that the appellant conducts such activities so as to increase sales of automobiles. The more automobiles are sold, more is incentive income for the appellant. Thus, the incentive received by the appellant....
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....after verification by way of credit notes without deducting any TDS. (b) Quantity Discounts or Target Linked Incentives. 4.2 In catena of decisions, it has been held that such kind of discounts are not taxable. (a) In Rohan Motors Limited reported at 2021 (45) GSTL 315 (Tri-Delhi) the appellant was a dealer of Maruti Udhyog Limited who used to buy vehicles from MUL for further sale to the buyers. Under dealership agreement, the appellant received discount from MUL which was referred to as 'incentives' under relevant schemes. Appellant worked on a principal to principal basis and not as an agent of MUL. Agreement itself provided that appellant had to undertake certain sales promotion activities as well for mutual benefit of business of the appellant and MUL. Incentives received thus, could not be treated as consideration for any service and are not leviable to service tax. Income earned by the appellant from registration charges and number plate charges is not taxable as Business Auxiliary Service. Freight expenses are not taxable under GTA. Amount collected towards cheque bounce charges, not being supply of Service, are not liable to Service Tax. (b) In Kafila Hospitality ....
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.... retailer in which promises are routinely exchanged, but to characterize this dialogue as involving supply after supply is unrealistic and impractical. To characterize the payment of the incentives intended to encourage the overall relationship to operate efficiently as involving supplies for consideration equally unpersuasive. A dealer will always wish to sell as many cars as practicable and to move old stock to make way for new stock. So too a dealer will always wish its ordering arrangements to be the most efficient and economically beneficial to it. The manufacturer will have the same objectives. It is this context which underpins the Tribunal's conclusion that the payments are not for the supply of anything by the dealer. As the Tribunal said at [86] the dealer (which must be inferred to act in an economically rational manner in the ordinary course) will always want to run the business in this way. The fact that the dealer receives a payment as an incentive when certain thresholds associated with running the business in this way does not mean that the dealer is supplying a service to the manufacturer for consideration. If the incentive payment were not available there is n....
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....ence cannot be considered to be discount towards purchase of goods from Hyundai Motors but it is separate and distinct from normal purchase and sale of cars, cannot be sustained. We are also of the view that whether such discount is given at the time of sale of car to the appellant or later on, it does not ceases to be a discount either way. Such discount is given only when Hyundai Motors has purchased cars from Hyundai Motors and when such cars are later on sold by the appellant at a discount based on various discount schemes offered by HMIL. 4.6 Revenue has filed two appeals bearing no. ST/10852/2020 & ST/12861/2020 against Shri Prajesh Manubhai Patel and M/s. Down Town Motors Pvt Ltd respectively. Revenue is aggrieved with Order-in-Appeal no. 75-76/2020 dated 14.08.2020 passed by Commissioner (Appeals), CGST & Central Excise Vadodara vide which she had set aside the Order-in-Original dated 17.02.2020 passed by the Joint Commissioner confirming the Service Tax demand of Rs. 1,16,82,969/- on M/s. Down Town Motors Pvt Ltd along with interest and equal under penalty Section 78, a penalty of 10,000/- on the company under Section 77 and a penalty of Rs. 1,00,000/- on Shri Pra....
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....rchase. Therefore, I find that treating trading activity of purchase and sale of products between two principle parties could not be construed as a service. I find that Incentives are in the nature of transaction done as per principal to principal basis and no service element is present in this case. 6.2.3 I find that "Trade Discount" & "Sales Claim Reimbursements are either Target based incentive or Additional incentive received as per schemes on achieving the Target sales or reimbursement of amount from Hyundai Motors in lieu of discount passed on/ given to customers. Hence, these discount income are not covered in definition of "service" and are not chargeable to service tax. Hence, I hold that the demand of service tax in respect of these discounts/ incentives, confirmed in the impugned order is not sustainable. Needless to say that as the demand itself, in respect of these discounts/ incentives is being set aside on merits, interest on the same and imposition of penalties on the appellant No. 1 in respect of these demands are also set aside. As the demand of service tax is being set aside on merits, appellant's contentions on limitation are not being discussed. Th....