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2020 (12) TMI 1014 - AT - Service TaxBusiness Auxiliary Services - service tax on the incentives received by the appellant - tax on incentives prior to July, 2012 - HELD THAT - The appellant purchases vehicles from MUL and sells the same to the buyers. It is clear from the agreement that the appellant works on a principal to principal basis and not as an agent of MUL. This is for the reason that the agreement itself provides that the appellant has to undertake certain sales promotion activities as well. The carrying out of such activities by the appellant is for the mutual benefit of the business of the appellant as well as the business of MUL. The amount of incentives received on such account cannot, therefore, be treated as consideration for any service. The incentives received by the appellant cannot, therefore, be leviable to service tax. The demand of service tax in respect of the amount collected on account of bouncing of cheques and cancellation of orders is also not sustainable. These amount are penal in nature and not towards consideration for any service - The issue relating to demand of service tax on income earned by the appellant from registration charges and number plate charges under BAS and freight expenses under GTA has also been decided in favour of the appellant in ROHAN MOTORS LTD. VERSUS C.C.E., MEERUT-I 2018 (7) TMI 29 - CESTAT NEW DELHI . Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Levy of service tax on incentives received under "business auxiliary service" (BAS). 2. Levy of service tax on registration and number plate charges under BAS. 3. Levy of service tax on miscellaneous income (penalty on bouncing of cheques and processing charges) under BAS. 4. Levy of service tax on transportation charges paid under "goods transport agency" (GTA) services. Issue-wise Detailed Analysis: 1. Levy of Service Tax on Incentives under BAS: The appellant, a dealer of Maruti Udhyog Ltd. (MUL), receives incentives from MUL under a dealership agreement. The Department sought to levy service tax on these incentives under BAS. The Tribunal noted that the appellant operates on a principal-to-principal basis with MUL, and the incentives received are for mutual business benefits, not as consideration for any service. Therefore, these incentives cannot be subjected to service tax. The Tribunal referenced its earlier decision in Rohan Motors Ltd. and other cases like Tyota Lakozy Auto Pvt. Ltd. and Sai Service Station Ltd., which held that such incentives/discounts received by dealers from manufacturers are not liable for service tax under BAS. The Tribunal emphasized that the Commissioner erred by differing from these precedents and was bound to follow the Tribunal's decisions. 2. Levy of Service Tax on Registration and Number Plate Charges under BAS: The Tribunal found that the amounts received for registration and number plate charges are not for any service provided on behalf of MUL or any other entity. These charges are for facilitating vehicle registration for the buyers and do not fall under BAS. This view was supported by the Tribunal's earlier decision in Rohan Motors Ltd., which set aside similar demands. 3. Levy of Service Tax on Miscellaneous Income (Penalty on Bouncing of Cheques and Processing Charges) under BAS: The Tribunal held that amounts collected as penalties for cheque bouncing and order cancellations are penal in nature and not towards consideration for any service. This position was supported by decisions in M/s Jaipur Jewellery Show and M/s K. N. Food Industries Pvt. Ltd., which ruled that such penal charges do not attract service tax. The Tribunal also noted that an advance ruling in the case of Bajaj Finance Ltd. was subsequently rectified to exempt such penal interest from GST. 4. Levy of Service Tax on Transportation Charges under GTA Services: The Tribunal observed that the appellant did not issue consignment notes necessary to classify as a goods transport agency. Without consignment notes, the activity cannot be classified under GTA services. The Tribunal's decision in South Eastern Coal Fields Ltd. supported this view, leading to the setting aside of the demand under GTA services. Conclusion: The Tribunal concluded that the impugned order dated June 18, 2015, by the Commissioner of Central Excise, Dehradun, confirming the service tax demand with penalty and interest, is unsustainable. The Tribunal set aside the order and allowed the appeal, emphasizing the need for adherence to judicial discipline by following higher appellate authorities' decisions.
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