2024 (8) TMI 1406 - AT - Service Tax

Levy of service tax - Business Auxiliary Service - cash discount given by M/s. Reliance Industries Ltd in respect of early payment of the goods sold to the customer - HELD THAT - It is found that the identical arrangement is their between Reliance Industries Ltd., and many Del-Credere Agent who was similarly placed as the present appellant. In a similar case of KHANNA POLYMERS VERSUS COMMISSIONER OF CENTRAL EXCISE, NOIDA 2016 (8) TMI 497 - CESTAT ALLAHABAD the Tribunal held that ' early payment discount in this case are cash discount and received in view of early payments made to the principles and are linked to the number of days by which payment is made early and has no relation with the consideration received for rendering the service in the form of commission under the category of Business Auxiliary Services .' Thus, the demand is not sustainable. Accordingly, the impugned order is set aside - appeal allowed.

Summary

Issues:
- Whether the cash discount given by M/s. Reliance Industries Ltd in respect of early payment of goods sold to the customer is liable to Service Tax under Business Auxiliary Service.

Analysis:

The case involved the appellant, engaged as a Del-Credere Agent of M/s. Reliance Industries Ltd, registered under Business Auxiliary Service. The appellant ensured payment realization for sales made by the principal and received Early Payment Incentives for early payments made by customers. The department contended that the cash discount given by M/s. Reliance Industries Ltd for early payments was liable to Service Tax under Business Auxiliary Service.

The appellant's counsel cited judgments where similar demands were set aside, emphasizing that the incentives received were not taxable under Business Auxiliary Service. The Tribunal noted that identical arrangements existed between Reliance Industries Ltd. and other Del-Credere Agents, with previous judgments setting aside similar demands. The Tribunal referred to cases such as M/s. Tradex Polymers P. Ltd. and M/s. Khanna Polymers, where it was held that early payment incentives were cash discounts not linked to service consideration, hence not taxable under Business Auxiliary Service.

Based on the precedents and the peculiar facts of the case, the Tribunal set aside the impugned order, concluding that the demand was not sustainable. The judgment highlighted that the incentives received were cash discounts for early payments and not related to service consideration under Business Auxiliary Service. Therefore, the appeal was allowed, and the impugned order was set aside.

In conclusion, the Tribunal's decision was in favor of the appellant, aligning with previous judgments that early payment incentives in the form of cash discounts were not subject to Service Tax under Business Auxiliary Service, based on the nature of the transactions and the legal interpretation of taxable services.