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TMI Blog2024 (7) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... y of service tax on trade discount / incentives received by an authorized automobile dealer from the manufacturer, is no more res integra and covered by a recent judgment of this Tribunal in the case of M/S PREM MOTORS PRIVATE LIMITED VERSUS COMMISSIONER, CENTRAL EXCISE CGST-JAIPUR [ 2023 (2) TMI 990 - CESTAT NEW DELHI] wherein the Tribunal scrutinizing the case laws on the subject observed ' the activity undertaken by the appellant is for the sale and purchase of the vehicle and the incentives are in the nature of trade discounts. The incentives, therefore form part of the sale price of the vehicles and have no correlation with the services to be rendered by the appellant. That in terms of the dealership agreement, the appellant purchases the vehicles from MSIL and sells the same to its end customers.' Applicability of 5% / 6%/7% of the value of the trading activity under Rule 6(3)(i) of Cenvat Credit Rules, 2004 - HELD THAT:- The appellant has reversed the total credit attributable to input services that had been used in providing trading activity; therefore considering the Notification No.13/2016-CE(NT) dated 01.03.2016 issued subsequently, wherein it is prescribed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service, etc.. On the basis of Audit of their records, it is alleged that the appellant had failed to discharge service tax of Rs.3,03,50,663/- on various incentives/discounts received from the manufacturer on sale of the cars;wrongly availed cenvat credit of Rs.52,199/- on ineligible services and failed to follow the procedure laid down under rule 6 of CCR,2004, when common input services were used in providing taxable services and also for their trading activity by way of discharging 5%/6% 7% as applicable, on the value of the said activity, totally amounting to Rs.3,84,28,721/- during the period April 2011 to September 2015. Consequently show-cause notice was issued to them for recovery of the same with interest and penalty. On adjudication, the learned Commissioner has confirmed a total amount of service tax of Rs.3,03,50,663/- for the period from October 2010 to September 2015, the amount of Rs.3,84,28,721/- being 5%/6%/7% of the value of the trading activity pertaining to the period 2011-2015; also confirmed an amount of Rs.52,199/- being cenvat credit irregularly availed during October 2010 to March 2011 change; also imposed equal amount of penalty and interest under relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity cannot be considered as an exempted service. However, on becoming aware of the provisions of Rule 6 of CCR,2004, they computed the total amount of CENVAT credit availed during October 2010 to September 2015 on input services attributable to trading activity and reversed Rs.42,30,802/- under Rule 6(3) of CCR,2004 and the said amount has been appropriated by the adjudicating authority in the impugned order. Under instruction, the learned Chartered Accountant submitted that even though as per their calculation, the total amount required to be reversed is Rs.31,87,989/-; however they do not intend to pursue the excess amount of reversal in the total amount of Rs.42,40,802/- made under protest. Their only contention is that since it was a bona fide mistake of not reversing the proportionate cenvat credit attributable to trading activity during the relevant period and the entire credit has been reversed subsequently before issuance of the show-cause notice, therefore imposition of penalty is not warranted. Further he has submitted that since show-cause notice was issued on 11.04.2016 demanding duty for the period from October 2010 to September 2015 on various issues, the period prio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT) (ii) T.V. Sundram Iyengar Sons Pvt. Ltd. v. Commissioner of CGST C. Ex., Madurai [2021 (55) G.S.T.L. 144 (Mad.)] (iii) B.M. Autolink v. Commissioner of Central Excise [2022-VIL-900-CESTAT-AHM-ST] (iv) Roshan Motors Pvt. Ltd. v. Commissioner of Central Excise [2022-VIL-654-CESTAT-DEL-ST] (v) Anand Motor Agencies Limited v. Commissioner of Customs [2022-VIL-116-CESTAT-ALH-ST] (vi) Kafila Hospitality and Travels Pvt. Ltd. v. Commissioner of Service Tax [2021 (47) G.S.T.L. 140 (Tri. - LB) = [2021] 125 taxmann.com 309 (New Delhi - CESTAT) 10 . That all the above cases relates to dealership agreement between the manufacturer of motor vehicles (MUL, MSIL ,TML) with their dealers for sale purchase of vehicles. In terms of the agreement it has been noticed that the dealer works on principal to principal basis and not as an agent of the manufacturer. The agreement itself provides for certain sales promotion activities which are for the mutual benefit of the business of the manufacturer as well as the dealer. The observations of the Ahmedabad Bench of the Tribunal in B.M. Autolink (supra). 4. We have carefully considered the submissions made by both the sides and perused the records. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplies in general and so the target incentives paid by a motor vehicle manufacturer to a dealer would not qualify as consideration as the incentives would be in relation to all supplies and not in relation to a particular supply. The relevant portion of the decision of the Federal Court is reproduced below :- 53. On analysis, the so-called supplies for consideration identified by the Commissioner are nothing more than the encouragement of an overall business relationship between the manufacturer and the dealer to the mutual benefit of both. The relationship involves a whole raft of obligation from one to the other all, presumably, with the ultimate objective of maximizing their respective commercial positions. As the A.P. Group put it, the overall relationship contemplates a continuing dialogue between wholesaler and retailer in which promises are routinely exchanged, but to characterize this dialogue as involving supply after supply is unrealistic and impractical. To characterize the payment of the incentives intended to encourage the overall relationship to operate efficiently as involving supplies for consideration equally unpersuasive. A dealer will always wish to sell as man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore form part of the sale price of the vehicles and have no correlation with the services to be rendered by the appellant. That in terms of the dealership agreement, the appellant purchases the vehicles from MSIL and sells the same to its end customers. The activity of promoting the sale is with respect to the vehicles owned by the appellant which incidentally is in interest of both the parties. Reliance is placed on the observations referred above in the case of Kafila Hospitality and Travels Pvt. Ltd. (supra). 14 . We also find that the appellant is engaged in the onward sale of vehicles which involves merely transfer of property in goods which is excluded from the definition of service . That Section 66D of the Finance Act, 1994 contains the negative list of services under various clauses and clause (e) provides for trading of goods . On this ground also we find that incentives which are part of sale activity are not exigible to service tax. The circumstances under which the incentives / discounts received by the appellant on purchase of cars from the manufacturer are more or less similar to the facts considered by the Tribunal in the case of Prem Motors Pvt. Ltd. (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... needs to be remanded to the adjudicating authority to ascertain the said fact and recompute the liability with interest. The appellant has not pressed for confirmation of inadmissible cenvat credit of Rs.52,199/- considering the amount as insignificant. 9. On the issue of imposition of penalty, we find that major part of the demand has been set aside and on the issue of applicability of Rule 6, we have observed that the appellant had already reversed the attributable cenvat credit which is in excess of Rs.10,42,813/- than the amount payable by them as claimed by them; therefore imposition of penalty under Section 78 of the Finance Act or Rule 15(3) of the CENVAT Credit Rules, in our view, is unwarranted and accordingly set aside. 10. In view of the above, the impugned order is modified and confirmation of demand of Rs.3,03,50,663/- on various incentives / discounts with interest and penalty and the amount of Rs.3,84,28,721/- confirmed under Rule 6(3) of Cenvat Credit Rules, 2004 being 5%/6%/7% of the value of the exempted services are set aside; also penalties imposed on the appellant are set aside. The matter is remanded to the adjudicating authority for the purpose of verificati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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