2024 (10) TMI 901 - AT - Service Tax

Levy of service tax - income recorded under the head trade discounts and incentives which is alleged to have been received as consideration for promoting or marketing vehicles of respective Tata Motors Limited - extended period of limitation - HELD THAT - The Revenue has demanded the service tax on the trade discount given by M/s. TATA Motors Limited to its buyer i.e. the appellant. This transaction is purely a sale purchase transaction. The appellant have not provided any service against the amount of trade discount. The trade discount is deducted from the sale value of the goods. Therefore, the entire transaction between the appellant and M/s. TATA Motors Ltd is purchase and sale of the cars. This Tribunal time and again clearly held that since the discount/ incentive given by the car manufacturer to its dealer in the course of the sale of the car to the dealer is not amount to any service. Therefore, consequently no service tax is payable. Even for the period post negative list regime in the Finance Act, 1944, the sale of goods by way of transfer of title of goods is excluded from the service. The Division bench of this Tribunal dealing with the identical issue in the case of INFINIUM MOTORS GUJ PVT LTD VERSUS C.S.T. -SERVICE TAX - AHMEDABAD 2022 (11) TMI 948 - CESTAT AHMEDABAD held that ' it is not in dispute about the transaction even in the present case being identical and sales incentive given by M/s Toyota Kirloskar Motors Pvt Ltd to the appellant is nothing but in connection with purchase and sale of the vehicles. Hence, the same can not be considered as commission against any service by any stretch of imagination. ' - Thus, it is settled that the trade incentive/ discount is not liable to service tax. Thus, in the present case, the amount of trade discount is not liable to service tax. Hence, the impugned order is set aside, the appeal is allowed.

Summary

Issues Involved:

1. Whether the appellant is liable to discharge service tax on income recorded under the head "trade discounts and incentives" received from Tata Motors Limited (TML).
2. Whether the extended period of limitation was correctly invoked in the present case.

Detailed Analysis:

1. Liability to Discharge Service Tax on Trade Discounts and Incentives:

The central issue in this case was whether the appellant, a registered dealership of Tata Motors Limited (TML), was liable to pay service tax on trade discounts and incentives received from TML. The appellant argued that these incentives were not consideration for any service rendered but were instead discounts on the purchase price of vehicles. The dealership agreement between the appellant and TML was on a "Principal to Principal" basis, meaning the appellant purchased vehicles from TML for resale to its customers, and the incentives were extended as price reductions on these purchases.

The appellant contended that the incentives did not constitute a service because there was no activity carried out by one person for another for consideration, as required under Section 65B (44) of the Finance Act. The definition of "service" explicitly excludes the transfer of title in goods, which was the nature of the transactions between the appellant and TML.

The Tribunal examined the nature of the transactions and found that the trade discounts were part of the sale and purchase of vehicles between the appellant and TML. The discounts were not linked to any service provided by the appellant to TML. The Tribunal referenced several judgments, including those in the cases of Infinium Motors Gujarat Pvt. Ltd. and CST, Mumbai vs. Sai Service Station Ltd., which consistently held that such trade incentives or discounts do not qualify as consideration for a service and are not subject to service tax.

2. Invocation of Extended Period of Limitation:

The appellant also challenged the invocation of the extended period of limitation, arguing that there was no suppression of facts or intention to evade tax. The Tribunal noted that for the extended period to apply, there must be evidence of fraud, willful misstatement, or suppression of facts. The appellant contended that the Department failed to establish any mala fide intent on their part.

The Tribunal considered previous judgments, such as Government of India vs. Madras Rubber Factory Ltd., which emphasized that unless mala fide intent is proven, the extended period cannot be invoked. The Tribunal found no evidence of suppression or fraudulent intent by the appellant and concluded that the extended period of limitation was wrongly invoked.

Conclusion:

The Tribunal concluded that the trade discounts and incentives received by the appellant from TML were not liable to service tax as they were part of the sale transaction and not consideration for any service. Consequently, the order demanding service tax was set aside. Additionally, the Tribunal found the invocation of the extended period of limitation to be unjustified due to the absence of any suppression or fraudulent intent by the appellant. The appeal was allowed, and the impugned order was set aside.