TaxTMI 
TaxTMI 
2026 (5) TMI 265
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....ective buyers of cars but failed to discharge service tax for the services rendered, which fall under the scope of Business Auxiliary Service (BAS) during the period from 2006-07 to 2009-10, amounting to Rs.59,72,325/-. Show-cause notice was issued on 05.04.2011 invoking extended period of limitation for recovery of the said amount with interest and proposal for penalty. The amount of Rs.21,31,232/- towards service tax and interest of Rs.5,03,281/- paid during the course of investigation was appropriated. On adjudication, the demand was confirmed with interest and penalty under different sections of Finance Act, 1994. Hence, the present appeal. 3.1. At the outset, the learned advocate for the appellant referring to the Dealers Agreement entered with MSIL has submitted that the relationship between the appellant and MSIL is that of principal-to-principal basis. It is submitted that the incentives / discounts received from MSIL on the activity of achieving target of purchase/sale of vehicles and spare parts will not form part of taxable value for levy of service tax. She has referred to the judgment of Hon'ble Supreme Court in the case of BSNL Vs. UOI [2006(2) STR 161 (SC)]. In su....
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....le to service tax under the category of Business Auxiliary Service during the relevant periods. This issue is no more res integra which has been addressed by this Tribunal in the case of Bangalore Motors Pvt. Ltd. (supra). Following the principle of law laid down in the case of Prem Motors Pvt. Ltd. [2023(73) GSTL 97 (Tri. Del.)], this Tribunal held as follows:- 7. The facts not in dispute are that the appellant are authorized dealers of Volkswagen brand cars and also providing services of cars of the said brand. On purchase of the cars from the manufacturer Volkswagen Limited, they received various discounts / incentives on achieving the sales target during the relevant period. Applicability of service tax on trade discount / incentives received by an authorized automobile dealer from the manufacturer, is no more res integra and covered by a recent judgment of this Tribunal in the case of Prem Motors Pvt. Ltd. Vs. CCE&CGST, Jaipur (supra) wherein the Tribunal scrutinizing the case laws on the subject observed as follows: 8. The issue which arises for our consideration is whether service tax is leviable on incentives/discount, reimbursement extended by MSIL to the....
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.... 11. The Larger Bench of this Tribunal in the case of Kafila Hospitality and Travels Pvt. Ltd. (supra) 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 Tribunal 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 the 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 analysed the scope of the term 'incentives' that they are generally given to encourage performance of the party. It is relevant to appreciate the observations made in the said judgment : "77. Consideration, which is taxable under section 67 of the Finance Act, should be transaction specific. Incentives, on the other hand, are based on general performance of the service provider and are not to be related to any particular transaction of service. It needs to be noted that....
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....ervice to the manufacturer for consideration. If the incentive payment were not available there is no basis to infer that the dealer would not behave in the same way for free. For these reasons there cannot be said to be any supply for consideration in these arrangements. (Emphasis supplied) 12. As a matter of judicial discipline the aforesaid decisions are binding on us and in light thereof we find that the present case is squarely covered by the law laid down in those judgments. We have examined the dealership agreement entered between MSIL and the appellant and we find that MSIL is engaged in manufacturing, marketing and selling of motor vehicles and the appellant purchases the vehicles from the manufacturer as their authorised dealer on principal to principal basis. The relevant clause is quoted herein below : "C. MSIL having considered the representations made and the application submitted by the Dealer agrees to appoint the Dealer as the Authorised Dealer. It is made clear that MSIL would sell the products and parts to the dealer on principal to principal basis. The dealer would sell the products and parts and would provide service to the customers ....
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.... such incentives were offered by M/s MSIL to the appellants for achieving certain sales targets. The modus operandi adopted by the appellants for making transaction with M/s MSIL remain the same all along, before the amendment of service tax statue prior to 01.07.2012 and the period subsequent thereto under the 'negative list' regime. Thus, in our considered view, for the similar set of facts, views cannot be changed to hold that no service tax is leviable for the prior period and liability can be fastened with effect from 01.07.2012 under the negative list. 6. In the present case, since there is no element of service involved in the transactions between the appellants and M/s MSIL, it cannot be said that there is provision of taxable service, for the purpose of levy of service tax. We have also perused the periodic VAT returns filed by the appellants together with the audited Profit & Loss account and the Balance-Sheet. It transpires from the said statutory records that the appellants have reflected the particulars of total sales of vehicles and profit earned towards such transactions. The fact is also not under dispute that the appropriate authorities under the VAT statu....