Custom, Excise & Service Tax Tribunal
Prabhakar Marotrao Thaokar & Sons vs Commissioner Of Central Excise,Nagpur on 5 January, 2018
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. ST/85234/15 (Arising out of Order-in-Appeal No. NGP/EXCUS/000/APP/152/14-15 dt. 13.10.2014 passed by the Commissioner of Customs & Central Excise (Appeals), Nagpur ) For approval and signature: Honble Shri Ramesh Nair, Member (Judicial) Honble Shri Raju, Member (Technical) =======================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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Prabhakar Marotrao Thaokar & Sons
:
Appellant
VS
Commissioner of Central Excise,Nagpur
:
Respondent
Appearance
Shri D.H. Nadkarni, Advocate for Appellant
Shri V.R. Reddy, Asstt. Commr. (A.R) for respondent
CORAM:
Honble Shri Ramesh Nair, Member (Judicial)
Honble Shri Raju, Member (Technical)
Date of hearing : 05/01/2018
Date of pronouncement : 29/01/2018
ORDER NO.
Per : Ramesh Nair
The fact of the case are that the appellant is engaged in acting as Wholesale dealer for the sale of the product Jarda (Chewing Tobacco) under the brand name of Sarvotkrusht Nagpuri Jarda manufactured by M/s. Gunaji Marotrao Thaokar & Co. In this regard the appellant M/s. Gunaji entered into an agreement and one of the condition is that the manufacturer M/s. Gunaji gives discount to the appellant while supplying the goods for further distribution. The case of the department is that the said discount is nothing but a sales commission which is liable to service tax under the category of Business Auxiliary Service under Section 65 (105) of the Finance Act, 1994. Accordingly a show cause notice was issued which was culminated into an adjudication order whereby the demand of service tax on the said discount treating it as commission was confirmed. The appellant being aggrieved by the Order-in-original filed appeal before the Commissioner (Appeals) who upholding the Order-in-Original rejected the appeal filed by the appellant therefore the appellant are before us.
2. Shri D.H. Nadkarni, Ld. Counsel appearing on behalf of the appellant submits that as per the agreement, as well as bills raised by the manufacturer on the appellant and subsequent sale made by the appellant to various customers, the transaction between the manufacturer and the appellant is one of sale. During the sale of goods whatever discount was extended by the manufacturer M/s. Gunaji to the appellant is trade discount and the same is not a commission. Therefore there is no question of service tax on the said trade margin. In this regard, he refer to the agreement between the manufacturer M/s. Gunaji and the appellant sales invoices of manufacturer to the appellant and appellant to their customers.
3. Shri V.R. Reddy, Ld. Asstt. Commr. (A.R.) appearing on behalf of Revenue reiterates the findings of the impugned order.
4. On careful consideration of the submissions made by both the sides and on perusal of records. We find that as per the agreement particularly the following clause:
5. The Wholesale Distributor shall sale the goods at the price as determined by the Manufacturer. It shall not charge anything extra over and above the said price. The Manufacturers shall not be responsible for any loss of goods after it leaves the factory premises. Wholesale Distributor would be the owner of the goods once same are supplied to them by the manufacturer from the factory gate and the Wholesale Distributor shall take possession of the goods from the factory gate and shall transport the same to its godowns at its own expenses. It is observed from the above para that after supply of goods by the manufacturer the ownership of goods is transferred to the wholesale distributor who is the appellant here. The sales invoice raised by the manufacture is scanned below:
From the agreement coupled with the above invoice it can be seen that the transaction between the manufacturer M/s. Gunaji and the appellant is clearly of sale. In the invoice the manufacturer has charged 20% VAT the transaction is clearly at arms length hence sale transaction on principle to principle basis. From the invoice, it is also observed that a trade discount was passed on by the manufacturer to the appellant. As per this undisputed fact once, the transaction is of sale there is no relationship of service provider and service recipient between the manufacturer and the buyer (the present appellant). Accordingly, the discount passed on by the manufacturer to the appellant cannot be construed as a commission and the same is not the subject matter of levy of service tax. It is further seen that the appellant also, after purchase of goods from the manufacturer further sold to various traders. A copy of the sale invoice issued by the appellant is scanned below:
From the above invoice it can be seen that it is clearly a sale invoice under which the appellant also paid the VAT. This shows that the transaction from the manufacturer to the appellant and subsequent from appellant to the individual traders are clearly sale transactions. Hence no service is involved. As per the above facts, we are of the clear view that a trading margin cannot be subject matter of levy of service tax. Accordingly, the impugned order is set aside the appeal is allowed.
(Pronounced in court on 29/01/2018) (Raju) Member (Technical) (Ramesh Nair) Member (Judicial) SM.4
ST/85234/15