2023 (6) TMI 995 - AT - Service Tax

Short payment of Service Tax - Business auxiliary service - trade discount, incentives and commission offered by the car manufacturer - principal to principal basis - re-determination of the amount of service tax payable on business actually services - such recalculated amount of service tax payable on business auxiliary services were not acceptable to the appellants - HELD THAT - The relevant sub-clause invoked in the impugned order is relating to (i) promotion or marketing or sale of goods produced or provided by or belonging to the client . From the discussion in impugned order, 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. The trade discount, incentives and commission offered by the car manufacturer M/s MSIL is in accordance with the agreement of the scheme announced by them. The Department does not dispute that there was such agreements, scheme between the appellant in the car manufacturers and the account of the appellant only reflect the actual discount allowed to them. The Department s argument is that the said discount/commission is in view of services rendered by the appellant by way of popularisation of the sales and consumption of the products by the end customer - it difficult to accept the conclusion arrived at in the impugned order that all the discounts/commission/incentives given by the manufacturer for the various types of targets achieved in terms of the number of vehicles sold under a particular model/category, consistent achievement of targets by each quarter, exchange bonus etc., are to be treated as compensation for the services rendered by the appellants by way of popularization of sales and purchase of the cars of the manufacturer. The element of sales promotion or marketing services is involved only when the appellants provide some service to the end customer in sale of the cars. If the discounts/commission/incentives are given in terms of the specific schemes or an agreement entered by the manufacturer of car with the appellants, then such transaction cannot be overstretched to categorize it as service for the purpose of charging service tax. CBIC Circular No. 87/05/2006-ST dated 6.11.2006 clarifies 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 - As the present case of incentives/ commission is solely related to trade discounts for sale of cars in accordance with the regular practice as well as the agreement/schemes that were in vogue in the industry, the same is not treated as compensation received by the appellant for any services provided to the car manufacturer M/s MSIL. The dispute pertaining to the issue of service tax liability on discounts/commission offered to car dealers by manufacturer has attained finality in view of the decisions taken by this Tribunal and the Apex Court in a number of cases - reliance placed in COMMISSIONER OF SERVICE TAX, MUMBAI-I VERSUS SAI SERVICE STATION LTD 2013 (10) TMI 1155 - CESTAT MUMBAI where it was held that We have gone through the circular issued by MUL which provides certain incentives in respect of cars sold by the assessee respondent. These incentives are in the form of trade discount, thus no demand. In the case of TOYOTA LAKOZY AUTO PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX/CENTRAL EXCISE MUMBAI -II / MUMBAI - V 2016 (12) TMI 541 - CESTAT MUMBAI the Tribunal has held the discounts received on procurement of vehicles from the manufacturer are not liable to tax as business auxiliary services and set aside the demand on that head. Thus, the demand of service tax for an amount of Rs. 1,29,32,934/- determined in the impugned order, in respect of taxable services under the category of business auxiliary services along with interest, and penalty under Section 78 of Finance Act, 1994 fails to survive - Similarly the penalty of Rs.10,000/- imposed on the appellants on the ground that there was a failure on the part of the appellant to file the ST-3 return, is also upheld. Appeal disposed off.

Summary

Issues Involved:
1. Service tax liability on 'Renting of immovable properties.'
2. Service tax liability on 'Authorised Service Station.'
3. Service tax liability on 'Business Auxiliary Services.'

Summary:

Issue 1: Service Tax Liability on 'Renting of Immovable Properties'
The Tribunal in its earlier order directed for the recomputation of the correct service tax demand. The Principal Commissioner recalculated the service tax liability, taking into account the total service tax payable and the actual service tax paid by the appellants. The recalculated amount of service tax short paid was Rs. 2,37,553/-. The appellants accepted this recalculated amount, and the Tribunal found no need for further examination on this issue.

Issue 2: Service Tax Liability on 'Authorised Service Station'
The Tribunal had directed the verification of tax payments claimed by the appellant and the actual service tax liable to be paid after adjusting for tax payments made both in cash and through Cenvat credit. The Principal Commissioner recalculated the service tax liability, considering the total service tax payable and the actual service tax paid. The recalculated amount of service tax short paid was Rs. 3,77,161/-. The appellants accepted this recalculated amount, and the Tribunal found no need for further examination on this issue.

Issue 3: Service Tax Liability on 'Business Auxiliary Services'
The Tribunal had directed for de novo proceedings to consider various contentions raised by the appellants. The Principal Commissioner concluded that the various incentives/commissions received by the appellants from M/s MSIL were for sales promotion activities and recalculated the service tax payable as Rs. 1,29,32,934/-. The appellants contested this demand, arguing that the incentives/commissions were trade discounts and not for services rendered. The Tribunal found that the discounts/commissions were in accordance with agreements/schemes and did not constitute compensation for services provided. The Tribunal referred to several decisions, including those of the Apex Court, which supported the appellants' contention that such incentives/commissions are not taxable under 'Business Auxiliary Services.' Consequently, the Tribunal concluded that the demand of Rs. 1,29,32,934/- along with interest and penalty under Section 78 of the Finance Act, 1994, fails to survive.

Conclusion:
The appeal is partly allowed. The demands of service tax on 'Renting of immovable properties' (Rs. 2,37,553/-) and 'Authorised Service Station' (Rs. 3,77,161/-) are upheld, along with a penalty of Rs. 10,000/- for failure to file ST-3 returns. The demand of Rs. 1,29,32,934/- under 'Business Auxiliary Services' is set aside.