2022 (12) TMI 12 - AT - Service Tax

Levy of service tax - Business Auxiliary Service or not - discount given by M/s. Maruti Suzuki India Ltd. to the appellant in connection with sale of vehicles which was further sold by the appellant on principal to principal basis - service charges or not - HELD THAT - The fact is not under dispute that the appellant being a dealer purchase the vehicles from M/s. Maruti Suzuki India Ltd. and subsequently sell the same to various customers. The transaction between M/s. Maruti Suzuki India Ltd. and the dealer and subsequently sale transaction between the dealer and the customs are purely on principal to principal basis. The vehicle manufacturer M/s. Maruti Suzuki India Ltd. on the basis of yearly performance of sale grants the discount to the dealer, this discount is nothing but a discount in the sale value of the vehicle sold throughout the year therefore, these sales discount in the course of transaction of sale and purchase of the vehicles hence, the same cannot be considered as service for levy of service tax. From the judgment in M/S. ROHAN MOTORS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, DEHRADUN 2020 (12) TMI 1014 - CESTAT NEW DELHI which has considered other decisions also, it was categorically held in the identical situation, the amount received as discount/incentive from the vehicle manufacturer by the appellant being the dealer is not liable to service tax. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Whether the discount given by M/s. Maruti Suzuki India Ltd. to the appellant in connection with the sale of vehicles, which were further sold by the appellant on a principal-to-principal basis, should be considered as service charges towards Business Auxiliary Service and be liable for service tax or not.

Comprehensive Analysis:

Issue 1: Consideration of Discounts as Service Charges
The tribunal examined whether the discounts provided by M/s. Maruti Suzuki India Ltd. to the dealer, who subsequently sold the vehicles to customers, should be categorized as service charges for Business Auxiliary Service and attract service tax. The tribunal noted that the transactions between the manufacturer and the dealer, as well as the subsequent sales, were on a principal-to-principal basis. It was established that the discounts granted by the manufacturer based on yearly sales performance were essentially reductions in the sale value of the vehicles. The tribunal concluded that these discounts were integral to the sale and purchase transactions and could not be classified as a separate service for service tax purposes. This conclusion was supported by previous judgments cited by the appellant, which had ruled in favor of dealers in similar situations.

Judicial Precedents:
The tribunal referred to the judgment in Roshan Motors Pvt. Ltd., where it was held that incentives and discount support received by the dealer from the manufacturer could not be considered as consideration for any service, thereby not liable for service tax. The tribunal also cited the decision in Rohan Motors Ltd., which reiterated that discounts and incentives received by dealers on a principal-to-principal basis were not subject to service tax under Business Auxiliary Service. Additionally, the tribunal highlighted the ruling in Toyota Lakozy Auto (P.) Ltd., which emphasized that discounts and incentives received by dealers did not fall under the purview of service tax, especially when the transactions were on a principal-to-principal basis.

Department's Error and Acceptance of No Service Tax Liability:
The tribunal noted that the department had erred in attempting to levy service tax on the discounts received by the dealer. It highlighted instances where the Commissioner and the Superintendent had set aside demands for service tax on similar activities, acknowledging that no service tax was payable on the discounts. This demonstrated the department's acceptance that the discounts received by the dealer were not subject to service tax.

Conclusion:
Based on the detailed analysis and precedents cited, the tribunal concluded that the discounts provided by the manufacturer to the dealer, who then sold the vehicles on a principal-to-principal basis, were not liable for service tax. The impugned order attempting to levy service tax on these discounts was deemed unsustainable and set aside, ultimately allowing the dealer's appeal.

Final Decision:
The tribunal pronounced the decision on 28.11.2022, setting aside the impugned order and allowing the appeal, thereby confirming that no service tax was payable on the discounts received by the dealer in connection with the sale of vehicles.