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TMI Blog2024 (11) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... hroughout the year therefore, these sales discount in the course of transaction of sale and purchase of the vehicles, hence, the same cannot be considered as service for levy of service tax. This issue is no longer res-integra as the same has been decided in the various judgments cited by the appellant. See B M Autolink [ 2022 (12) TMI 12 - CESTAT AHMEDABAD] Booking cancellation charges - There is no provision of service made towards such cancellation. In the case of Divine Autotech Private Limited [ 2024 (6) TMI 1329 - CESTAT NEW DELHI] it was held that booking cancellation charges for motor vehicles received by Appellant is in the nature of compensation and not consideration for service. Further the CESTAT placed reliance on Circular No. 178/10/2022-GST dated August 3, 2022 wherein the issue of cancellation charges has been dealt with at length. Therefore, no service tax could be charged on them. The amount received as discount/ incentive from the vehicle manufacturer by the appellant being the dealer is not liable to service tax and service tax is also not leviable on the booking cancellation charges. - HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR And HON'BLE MEMBER (TEC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Travels Pvt Ltd. P. CST, 2021-VIL-101- CESTAT-DEL-ST, held that target-based incentives given to travel agents for increasing their own sale cannot be held to be in nature of service. Hence, the issue in question is squarely covered by this decision of Larger Bench. 2.1 He further submits that impugned activity does not qualify as declared service. In the present instance, the Appellants purchase vehicles from MSIL/RIPL and further sells such vehicles to the customers. Such activity of sale is undertaken by the Appellants solely for themselves and on their own account. A perusal of the Dealership Agreements makes it abundantly clear that the Appellants and MSIL/RIPL act purely on principal-to-principal basis and not on behalf of one other. Reliance in this regard can be placed upon below set of jurisprudence where it has been held that where the transaction is on principal-to-principal basis, merely because a discount was passed on by the manufacturer to the assessee, that may not be construed as commission, and therefore, it cannot be the subject matter of levy of service tax. The Appellants do not take on any obligation to act or refrain from any act. The act of achieving purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um Motors Gujarat Private Limited v. CST, 2022-VIL-738- CESTAT-AHM-ST 3. Shri Mihir G Rayka, Learned Additional Commissioner (AR), appearing on behalf of the revenue, reiterates the findings of impugned order. 4. We have carefully considered the submissions made by both the sides and perused the records. We find that the fact is not under dispute that the appellant being a dealer, purchase the vehicles from M/s Maruti Suzuki India Private Limited/ M/s Renault India Private Limited and subsequently, sell the same to the various customers. The appellant purchases vehicles from M/s Maruti Suzuki India Private Limited/ M/s Renault India Private Limited respectively for making onward sale to the customers. M/s Maruti Suzuki India Private Limited/ M/s Renault India Private Limited supplies vehicle on ex-works factory basis. M/s Maruti Suzuki India Private Limited/ M/s Renault India Private Limited periodically declares maximum selling price below which appellant are free to price the vehicles. 4.1 M/s Maruti Suzuki India Private Limited/ M/s Renault India Private Limited also provides incentives and offer discounts to its dealers including appellants subject to the fulfillment of pre-not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of vehicles, to authorized dealer - appellant for the period July, 2012 onwards. 7. It is noticed that the appellant purchases vehicles from TML and sells the same to the buyers. It is clear from the agreement that the appellant works on principal to principal basis, and not as an agent of TML. 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 TML. The position in this regard is fairly settled as held by the Hon‟ble Supreme Court in the matter of case of Moped India Ltd. vs. CCE reported at 1986 (23) E.L.T. 8 (SC).The amount of incentives and discount support received on such account cannot, therefore, be treated as consideration for any service. The incentives and discount support received by the appellant cannot, therefore, be leviable to service tax. 8. In this connection, reference needs to be made to the decision of the Tribunal in Rohan Motors Ltd.-2021 (45) G.S.T.L. 315 (Tri.-Del.) (supra), wherein, referring to earlier decision of the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Service Tax under BAS, since the appellant is purchasing the cars from MUL on principal to principal basis and subsequently, reselling the same. 5. Revenue has ordered for payment of Service Tax under various receipts recorded under miscellaneous income. These include loading/unloading charges, Pollution Checkup charges, penalty-cum processing charges etc. It is obvious that these amounts have been received not towards provision of any service on behalf of MUL or anybody else. Consequently, there is no justification for levying Service Tax under BAS. 6. In miscellaneous income, commission amounts received from ICICI have also been included. This commission has been received for provision of furniture to ICICI for facilitation of accommodating representatives in the premises of the appellant for selling insurance policies for cars. Such an activity cannot be considered under BAS as has been held by the Larger Bench in the case of Pagadiya Auto Centre (supra). Consequently, we set aside the demand of Service Tax on such commission received. 7. A portion of the demand also has been raised under the category of GTA. The appellant has paid the freight expenses in connection with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der-In-Original demanding the service tax on the same activity and allowed the appeal. This order has been accepted by the department and following the same for a subsequent period, the Superintendent- CGST, Kandla vide Order No. 01/ST/Supdt./2020-21 dated 25.11.2020. dropped the proceedings. This shows that the department has accepted that no service tax was payable on the discount received by the appellant. 05. As per our above discussion and findings, the impugned order is not sustainable hence, the same is set aside. Appeal is allowed. Reliance is also placed upon the judgment by the Principal Bench of the Delhi Tribunal in the case Prem Motors Private Limited (supra) which is reproduced below:- 5. We have heard the Learned Counsel for the respective parties and perused the records. 6. The Learned counsel for the appellant argued that incentives are attributable to the activity of sale and not for rendering any services by the appellant and therefore are not chargeable to service tax. The case of the appellant is that they are merely engaged in sale-purchase of vehicles and the steps taken to promote the sale is for vehicles owned by the appellant itself. In support of their co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomers. The transaction between M/s Maruti Suzuki India Ltd and the dealer and subsequently sale transaction between the dealer and the end customers are purely on principle to principal basis. The vehicle manufacturer M/s Maruti Suzuki India Ltd. on the basis of yearly performance of sale grants the discount to the dealer, this discount is nothing but a discount in the sale value of the vehicle sold throughout the year therefore these sales discount in the course of transaction of sale and purchase of the vehicles hence, the same cannot be considered as service for levy of service tax. 11. The Larger Bench of this Tribunal in the case of Kafila Hospitality and Travels Pvt Ltd (supra) dealt with the issue whether service tax can be levied under the category of 'Business Auxiliary Service' on target based incentives paid to the travel agents by the Airlines as they were promoting and marketing the business of the Airlines. The Tribunal took the view that it is not a case where the air travel agent is promoting the service of the Airlines rather by sale of airlines ticket he was ensuring the promotion of its own business even though this may lead to incidental promotion of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cient and economically beneficial to it. The manufacture will have the same objectives. It is this context which underpins the Tribunal's conclusion that the payments are not for the supply of anything by the dealer. As the Tribunal said at [86] the dealer (which must be inferred to act in an economically rational manner in the ordinary course) will always want to run the business in this way. The fact that the dealer receives a payment as an incentive when certain thresholds associated with running the business in this way does not mean that the dealer is supplying a service to the manufacturer for consideration. If the incentive payment were not available there is no basis to infer that the dealer would not behave in the same way for free. For these reasons there cannot be said to be any supply for consideration in these arrangements. (emphasis supplied) 12. As a matter of judicial discipline the aforesaid decisions are binding on us and in light thereof we find that the present case is squarely covered by the law laid down in those judgments. We have examined the dealership agreement entered between MSIL and the appellant and we find that MSIL is engaged in manufacturing, ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned order is, therefore, set aside and the appeal is allowed accordingly. 4.2 On the issue regarding booking cancellation charges are not exigible to service tax, Learned counsel submits that Cancellation of booking charges are in the nature of compensation and not consideration. Hence, there is no provision of service made towards such cancellation. In the case of Divine Autotech Private Limited v. CCT, 2024-VIL-745-CESTAT-DEL-ST, it was held that booking cancellation charges for motor vehicles received by Appellant is in the nature of compensation and not consideration for service. Further the CESTAT placed reliance on Circular No. 178/10/2022-GST dated August 3, 2022 wherein the issue of cancellation charges has been dealt with at length. Therefore, no service tax could be charged on them. From the above discussions and findings, and the issues being covered by the judgements cited supra in the identical situation, the amount received as discount/ incentive from the vehicle manufacturer by the appellant being the dealer is not liable to service tax and service tax is also not leviable on the booking cancellation charges. 5. Accordingly, the impugned orders are set aside and app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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