2018 (10) TMI 1993 - AT - Service Tax

Levy of Service Tax - incentive received under dealership agreement with Maruti - sale of spare parts during the servicing of the vehicle - RTO charged required for a registration with RTO for getting the sold vehicle registration - CENVAT Credit on various input services - HELD THAT - These issues have been decided in favour of appellant in the identical set of facts and circumstances by TOYOTA LAKOZY AUTO PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX/CENTRAL EXCISE MUMBAI -II / MUMBAI - V 2016 (12) TMI 541 - CESTAT MUMBAI where it was held that This Tribunal, in its recent order in M/S ARPANNA AUTOMOTIVE PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS CENTRAL EXCISE 2016 (3) TMI 308 - CESTAT MUMBAI , held that the Service Tax liability confirmed under Business Auxiliary Service for the amount of RTO registration fees is set aside. Service tax on the handling charges incurred by the appellant while selling motor car from M/s Maruti Udyog Ltd. - HELD THAT - This issue is also covered in favour of appellant by the decision of this Tribunal in case of AUTOMOTIVE MANUFACTURERS PRIVATE LTD VERSUS COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS, NAGPUR 2015 (2) TMI 972 - CESTAT MUMBAI , wherein it was held that we do not understand how service tax levy would apply especially when the goods are subject to sales tax/VAT on a value inclusive of handling charges. It is not in dispute that the handling charges are incurred in connection with the procurement of the parts. If that be so, they will obviously form part of the value of the goods when they are subsequently sold. Sale of spare part, sold while servicing of the motor vehicle, which the department intends to include in assessable value in terms of Section 67 of the Finance Act for payment of service tax - HELD THAT - The issue decided in favour of appellant in M/S TANYA AUTOMOBILES PVT LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, MEERUT-I 2016 (1) TMI 704 - CESTAT ALLAHABAD where it was held that the cost of items supplied/sold and there is documentary proof specifically indicating value of the goods, the demand of Service Tax against the assessee for the cost of the goods supplied during repair does not appear sustainable. In this view of the matter, we set aside the impugned order and allow the appeal with consequential benefits. CENVAT Credit on various input services - HELD THAT - The same has been paid along with interest before issue of Show Cause Notice and the same, therefore, stands settled. The issue is settled in favour of the appellant and hence the impugned order is not sustainable - appeal allowed partly.

Summary

Issues Involved:
1. Charging of service tax on incentives received under the dealership agreement.
2. Inclusion of the cost of spare parts sold during vehicle servicing for service tax purposes.
3. Service tax on RTO charges for vehicle registration.
4. Service tax on handling charges received from buyers.
5. Availment of Cenvat credit on various input services.

Detailed Analysis:

1. Charging of Service Tax on Incentives Received Under Dealership Agreement:
The appellant, a dealer of Maruti Udyog Limited, contested the service tax demand on incentives received under the dealership agreement. The Tribunal referenced previous decisions, including *Toyoto Lakozy Auto Pvt. Ltd. vs. CST, C.EX., Mumbai II & V.*, which held that such incentives are in the form of trade discounts and not liable to service tax under the category of Business Auxiliary Service. The Tribunal concluded that the incentives received by the appellant from the manufacturer, designated as commission/incentive, are not subject to service tax, as these are discounts on the principal-to-principal supply of vehicles.

2. Inclusion of the Cost of Spare Parts Sold During Vehicle Servicing for Service Tax Purposes:
The appellant argued that the sale of spare parts during vehicle servicing should not be included in the service tax calculation as it constitutes a sale, not a service. The Tribunal supported this view, citing the decision in *Tanya Automobiles (P) Ltd. vs. Commissioner of C. Ex. & S.T., Meerut-I*, which confirmed that the cost of goods supplied during repair, if documented separately, should not be subject to service tax. Therefore, the demand for service tax on the sale of spare parts was set aside.

3. Service Tax on RTO Charges for Vehicle Registration:
The Tribunal examined whether the fees charged by the appellant for assisting customers with vehicle registration with the RTO were subject to service tax. Referring to *Wonder Cars Pvt. Ltd. vs. Commissioner of Central Excise, Pune-I*, the Tribunal held that such services do not fall under Business Auxiliary Service, as they are incidental and auxiliary to the primary service of selling vehicles. Thus, the service tax demand on RTO charges was annulled.

4. Service Tax on Handling Charges Received from Buyers:
The appellant's practice of charging handling fees for the sale of vehicles was also scrutinized. The Tribunal referenced *Automotive Manufacturers P. Ltd. vs. Commissioner of C.E. & C., Nagpur*, which established that handling charges included in the sale value of goods, on which VAT is paid, should not be subject to service tax. Consequently, the demand for service tax on handling charges was dismissed.

5. Availment of Cenvat Credit on Various Input Services:
The appellant had availed Cenvat credit on services such as insurance and courier services, which was contested by the department. However, the appellant had already reversed the credit along with applicable interest before the issuance of the Show Cause Notice. The Tribunal acknowledged this and deemed the issue settled.

Conclusion:
The Tribunal found that all issues raised in the appeal were previously adjudicated in favor of the appellant in similar cases. Consequently, the impugned order was not sustainable, and the appeal was allowed partially, setting aside the demands and penalties imposed by the adjudicating authority.