2024 (8) TMI 206 - AT - Service Tax

Taxability - discounts/incentives received by the appellant - extended period of limitation - HELD THAT - The relationship of the appellant, the dealer and M/s. TML is admittedly governed by the dealership agreement executed between them. Based on the scrutiny of those agreements only that the department have formed an opinion that the amount is received by the appellant for doing an act of achieving a target as specified by M/s. TML, hence, is an amount towards the consideration received for doing the said agreed act. The issue of demand on such discount/incentives is no more res integra. This Tribunal in the case of COMMISSIONER OF SERVICE TAX, MUMBAI-I VERSUS SAI SERVICE STATION LTD 2013 (10) TMI 1155 - CESTAT MUMBAI has held that the amount received for achieving the targets under target incentive scheme in the form of a trade discount/year end discount. This is an incentive given to encourage the dealer to buy and sell larger number of vehicles. It is not a payment for any service rendered to the manufacturer. In the present case, under the contract of sales, since the specific targets for specific quantum of sale of cars of the manufactures that the dealer is agreed to have received some amount as incentive/discount, such amounts are not towards rendering Business Auxiliary Services but the incentives are only trade discounts which are extended to the appellant for achieving the required targets. The activity of receiving the incentives/discounts is as good as a part of trading activity and cannot be called as service as is defined under Section 65B(44) of the Finance Act. The findings of the original adjudicating authority since are contrary to the earlier decisions on the same issue, those are liable to be set aside. Extended period of limitation - HELD THAT - The show cause notice must contain an averment to that effect pointing out specifically as to which of the various acts or omissions stated in the act have been committed/not committed by the assessee and the adjudicating authority must specifically deal with assessee s contention in rebuttal thereof. In the present case there is no such finding in the Order-in-Original except assuming that the amount in question is received by the appellant for rendering a taxable service. No such act is discussed which may amount to an act of suppression or concealment. Resultantly, we accept the appellant s contention that there was no reason with the department to issue the show cause notice after invoking the extended period. The show cause notice is therefore held to be barred by time. Thus, it is held that there was no service tax liability upon the appellant nor any alleged suppression has been committed by them. The show cause notice which has invoked almost five years period while raising the impugned demand is therefore held to be barred by time. The findings arrived at by original adjudicating authority are therefore hereby set aside - appeal allowed.

Summary

Issues Involved:
1. Taxability of discounts/incentives received by the appellant.
2. Classification of the received amounts as consideration for services.
3. Invocation of the extended period of limitation for issuing the show cause notice.

Detailed Analysis:

1. Taxability of Discounts/Incentives Received by the Appellant:

The appellant, engaged in providing various motor vehicle services, received discounts and incentives from M/s. Tata Motors Ltd. (TML) and other lubricant companies. The department treated these amounts as consideration for services and issued a show cause notice demanding service tax. The appellant argued that these amounts were trade discounts, part of the sale agreement, and thus, not subject to service tax.

2. Classification of the Received Amounts as Consideration for Services:

The department's position was that the incentives/discounts were conditional upon achieving specified targets, thus qualifying as consideration for services under Section 65B of the Finance Act, 1994. However, the appellant contended that these amounts were part of a trade discount, prevalent in the market, and not consideration for any service. The Tribunal examined the dealership agreement and observed that the relationship was on a principal-to-principal basis, not principal-agent. Citing previous judgments, the Tribunal concluded that such incentives are trade discounts, not payments for services rendered. Specifically, the Tribunal referenced the case of Commissioner of Service Tax, Mumbai-I Vs. Sai Service Station, which established that target incentives are trade discounts and not subject to service tax.

3. Invocation of the Extended Period of Limitation:

The show cause notice was issued for the period from 2014-15 to 2017-18, invoking the extended period of limitation. The appellant argued that there was no suppression of facts or intent to evade tax, as they had already discharged tax liabilities on commissions and other income. The Tribunal found no evidence of suppression or concealment by the appellant. Citing the Supreme Court's decision in Collector of Central Excise Vs. HMM Limited, the Tribunal emphasized that an inference of intent to evade tax cannot be automatically drawn without specific averments and findings. Consequently, the Tribunal held that the show cause notice was barred by time.

Conclusion:

The Tribunal concluded that there was no service tax liability on the discounts/incentives received by the appellant, as these were trade discounts, not consideration for services. Additionally, the invocation of the extended period for issuing the show cause notice was unjustified. The findings of the original adjudicating authority were set aside, and the appeal was allowed.

Order Pronounced: The appeal was allowed, and the findings of the original adjudicating authority were set aside.