Custom, Excise & Service Tax Tribunal
K P Cars Pvt Ltd vs Cochin-Cce on 29 October, 2024
Service Tax Appeal Nos. ST/21134/2015,
20181, 20182/2019, ST/20453/2021
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
BANGALORE
Regional Bench COURT-2
Service Tax Appeal No. 21134 of 2015
[Arising out of the Order-in-Original No. COC-EXCUS-000-COM-72 & 73-14-
15 DT 10-02-2015 dated 10.02.2015 passed by the Commissioner of Central
Excise, Customs and Service Tax, Cochin Commissionerate, Cochin.]
K P Cars Pvt., Ltd.,
Survey No. 228/1, Nh-47,
Vytilla Aroor, Bypass Road,
Maradu P.O.,
Cochin, Kerala - 682304 .......Appellant
VERSUS
Commissioner of Customs, Central Excise,
Service Tax,
Cochin Commissionerate,
C R Building,
I.S. Press Road, Ernakulam,
Cochin, Kerala - 682018 ..... Respondent
WITH
(i) Service Tax Appeal No. 20181 of 2019 [Arising out of the Order-in-Appeal No. COC-EXCUS-000-APP-1054&1055- 2018 dated 27.11.2018 passed by the Commissioner (Appeals) of Central Tax, Central Excise & Customs, Kochi.]
(ii) Service Tax Appeal No. 20182 of 2019 [Arising out of the Order-in-Appeal No. COC-EXCUS-000-APP-1054&1055- 2018 dated 27.11.2018 passed by the Commissioner (Appeals) of Central Tax, Central Excise & Customs, Kochi.]
(iii) Service Tax Appeal No. 20453 of 2021 [Arising out of the Order-in-Original No. COC-EXCUS-000-COM- 17&18/2020-21/ST/Pr. Commr dated 24.03.2021 passed by the Pr. Commissioner Central Tax & Central Excise, Cochin] Appearance:
Shri V. Raghuraman, Advocate for Appellant Shri Neeraj Kumar, Authorized Representative for Revenue Page 1 of 11 Service Tax Appeal Nos. ST/21134/2015, 20181, 20182/2019, ST/20453/2021 Coram:
Hon'ble P.A. Augustian, Member (Judicial) Hon'ble Pullela Nageswara Rao, Member (Technical) FINAL ORDER No. 21573-21576 of 2024 Date of Hearing: 02.05.2024 Date of Decision: 29.10.2024 Per: P. A. Augustian The issue in the present appeals is whether the incentives/discounts/margins received by the Appellant are liable to service tax under the category of 'Business Auxiliary services', whether service tax is payable on Audi claim/marketing claim amounts and, whether the extended period of limitation is applicable in the present case.
2. The brief facts are the M/s. K. P Cars Pvt., Ltd., the appellant is an authorized dealer of cars manufactured and sold by M/s Audi India, Mumbai and engaged in the activities of servicing and repairing of such vehicles. Appellant is also engaged in the business of selling of used Audi cars. In addition to the above, the Appellant is also providing services like arranging finance and insurance for purchase of cars on behalf of their clients. They have also obtained registration under the category of 'Authorized service station' services and 'Business Auxiliary services'. As per the intelligence gathered by the Preventive Wing, it is alleged that there is failure on the part of the Appellant to make full disclosure regarding the activities carried by them. After detailed investigation, show cause notices were issued for the period from 2008 to 2012 and service tax is demanded along with the interest and proposed penalties and the Adjudication authority as per the impugned Page 2 of 11 Service Tax Appeal Nos. ST/21134/2015, 20181, 20182/2019, ST/20453/2021 order confirmed the demand of duty along with the interest and imposed penalties for the above period under the provisions of the Finance Act, 1994. Aggrieved by the impugned orders, present appeals are filed before this Tribunal.
3. Further, Principal Commissioner vide Order-in-Original dated 24.03.2021 has adjudicated the Show Cause Notice Nos. 37/2017/ST dated 08.08.2017 and 55/2018-ST dated 13.04.2018 for the periods 01.04.2015 to 31.03.2016 and 01.04.2016 to 30.06.2017, respectively and dropped the demand on the service tax not paid on 'service' defined under Section 65(B)(44) of the Finance Act, 1994. Aggrieved by the order, the orders were reviewed by Committee of Chief Commissioners by Order No. 05/2021 and Authorised the department to file an Appeal before this Tribunal, consequently Appeal No. 20453/2021 was filed by the Revenue.
4. The details of the Appeals filed are, Appeal No. ST/21134/2015 is filed by the appellant against the confirmation of demand in Order-in- Original for the period April 2008 to March 2012 and the total service tax demanded was Rs. 48,79,884/-. Further the said confirmation of demand in Order-in-Original also includes the demand for the period from April 2012 to March, 2013 for the normal period amounting to Rs. 64,16,809/-. The Appeal No.ST/20181/2019 is against the confirmation of demand in Order-in-Original for period from April 2013 to March 2014 and total service tax demanded from the Appellant is Rs. 1,48,64,270/-. Similarly Appeal No. ST/20182/2019 is against the confirmation of demand in Order-in-Original for period from April 2014 to March 2015 and the service tax involved is Rs. 1,52,68,185/-. The Appeal No. ST/20453/2021 is against the confirmation of demand in Page 3 of 11 Service Tax Appeal Nos. ST/21134/2015, 20181, 20182/2019, ST/20453/2021 Order-in-Original for the period April 2015 to March 2016 involving an amount of Rs.3,01,95,518/-. and for the period from April 2016 to June 2017 involving amount of Rs. 1,89,48,580/-. The details are given in table below: -
Appeal Service Tax Penalties/
SCN Period
No. in Rs. Remarks
194/2013/ST April 2008 to Section 76
48,79,884/-
Dt.15.10.2013 March 2012 Rs. 200/day
or 2% of tax for
every month
21134/ whichever is
2015 72/2014 April 2012 to higher.
64,16,809/-
Dt.15.04.2014 March 2013 Section 77
Rs.20,000/-
Section 78
Rs.48,79,884/-
Section 70
20181/ 67/2015 April 2013 to Rs.10,000/-
1,48,64,272/-
2019 Dt 16.04.2015 March 2014 Section 76
Rs.14,86,427/-
Section 70
20182/ 08/2016/ST April 2014 to Rs. 10,000/-
1,52,68,185/-
2019 Dt. 05.02016 March 2015 Section 76
Rs.15,26,818/-
37/2017/ST April 2015 to Adjudicating
3,01,95,518/-
Dt 08.08.2017 March 2016 Authority dropped
20453/
55/2018/ST April 2016 to the demand.
2021
Dt 13.04.2018 June 2017 1,89,48,580/- Appeal filed by
Department
5. Since the issue involved in all the above 4(four)appeals is common they are being disposed by this order.
6. The Learned counsel for the Appellant during the hearing submitted that as regards the Service Tax demand on the amount received as discount or incentives, the learned Counsel submitted that Page 4 of 11 Service Tax Appeal Nos. ST/21134/2015, 20181, 20182/2019, ST/20453/2021 the discounts are in the nature of trade discounts received by way of 'credit notes'. Learned Counsel also drew our attention to the copy of the dealership agreement and the sales appendix, which contains various types of discounts. If the dealership agreement is considered as a whole, it is evident that it is on sale and purchase of the car and no service agreement is involved. The Learned Counsel relied on the decisions in the matter of Glynn Vs. Margetson 1983 A.C. 351, G.S. Lamba & Sons Vs. State of AP 2015 (324) ELT 316 (AP), T.V. Sundram Iyengar & Sons Pvt., Ltd., Vs. Commr of CGST & C.Ex. [2021 (55) GSTL 144 (Mad), BSNL Vs. UOI 2006 (2) STR 161 (SC).
7. The Learned Counsel also submitted that incentives are in the form of a Trade Discount, they are by way of dealership arrangement on principal to principal basis and there is no evidence to consider such transaction as 'Business Auxiliary Services' under Section 65(19) of Finance Act, 1994. The Learned Counsel relied on the decisions in the following cases;
i. Service Tax Vs. Sai Service Station Ltd., 2014 (35) S.T.R. 625 (Tri. - Mumbai) ii. CCE Vs. LMJ Services Ltd., 2017 (3) G.S.T.L. 263 (Tri. -
Del) iii. Satnam Auto Vs CCE., 2017 (52) S.T.R. 303 (Tri. - Del) iv. Sharyu Motors Vs. Commissioner -- 2016 (43) S.T.R. 158 (Tri- Mum) v. Toyota Lakozy Auto Pvt. Ltd. Vs. CST, 2017 (52) S.T.R. 299 (Tri. - Mum) vi. Jaybharat Automobiles Limited v. Commissioner of Service Tax, Mumbai 2016 (41) S.T.R. 311 (Tri.) vii. My Car Pvt Ltd vs. CCE, 2015 (40) S.T.R. 1018 (Tri. -
Del) Page 5 of 11 Service Tax Appeal Nos. ST/21134/2015, 20181, 20182/2019, ST/20453/2021 viii. Narain Automobiles Vs CCE, 2017-TIOL-3962-CESTAT-
ALL ix. SJS Auto Service Pvt Ltd. Vs Com. Of Central Goods & S.T., Meerut, 2020 (43) GSTL 200 (Tri All.) x. Rohan Motors Ltd vs CCE 2021 (45) GSTL 315 (Tri-Del) xi. Popular Vehicles & service Ltd vs CCE- ST Appeal No. 20449/2014 dt. 12.02.2020 (Cestat Bangalore) xii. Veer Prabhu Marketing Ltd vs CCE 2023 (73) GSTL 222 (Tri-Del)
8. The Learned Counsel further submitted that the profit incidental to activity of trading of cars cannot be considered as service. Learned Counsel relied on following decisions, Collector Vs. Indian Oxygen 1988 (36) E.L.T. 730 (SC), Baroda Electric Meters Ltd. Vs. Collector-1997 (94) E.L.T. 13 (S.C.). Further, submitted that the appellant is not engaged in sales promotion services and relied on the decision of Sundaram Finance Ltd., Vs. State of Kerala-AIR 1966 SC 1178, CIT Vs. Panipat Woollen & General Mills Co. Ltd. -AIR 1976 SC 640 (Para 7). The Learned Counsel further submitted that service tax cannot be demanded on Audi claim/Marketing claim, since it is not an income or expense and only balance receivable as regards to various claims. The Learned Counsel drew our attention to the copy of the balance sheet in support of the same. The learned Counsel further submitted that appellant was filing service tax returns regularly and was of bona fide belief that the discount received by them are not subject to service tax. Learned Counsel relied on the decision in the Padmini Products Vs. Collector-1989 (43) ELT 195 (SC), Uniworth Textiles Ltd., Vs. CCE, Raipur-2013 (288) ELT 161 SC, considering the same extended period of limitation cannot be invoked as done by the Adjudication Authority in Appeal No. ST/21134/2015, wherein the Page 6 of 11 Service Tax Appeal Nos. ST/21134/2015, 20181, 20182/2019, ST/20453/2021 demand is from April 2008 to March 2012 and Show cause notice was issued on 15.10.2013. Thus, extended period of limitation involving an amount of Rs. 42,09,054/- for the period from April 2008- Sept 2011 is beyond the period of limitation and unsustainable.
9. Learned Counsel further submitted that the issue is no more res integra and this Tribunal in the very same issue in the matter of M/s. Jubilant Motors (South) Pvt., Ltd., vide Final Order No. 40132/2024 dated 05.02.2024 in Service tax Appeal No. 42289 of 2018 considered the entire issue and allowed the appeal as per the following.
"6.3. It needs to be stated that in the Show Cause Notice, it is merely averred that the activity falls under BAS, and the specific sub clause of Section 65 (19) has not been mentioned. So from the Show Cause Notice it is not possible to understand as to why the department alleges that the activity would fall under BAS. However, in the impugned order, the adjudicating authority goes a step further to observe that the activity is in the nature of promotion of business of M/s. Volkswagen and M/s Castrol India. It requires to be stated that the agreements very clearly state that the relationship between the appellant and these companies are on a principal to principal basis. Thus, M/s. Volkswagen or M/s. Castrol cannot be considered as a client of the appellant. In para 25.4 of the impugned order, the adjudicating authority holds that 'I do agree that the sale takes place on principal-to-principal basis.' However, it is observed by the adjudicating authority that such principal to principal relation between the appellant and M/s. Volkswagen is only for limited purpose of sale. We are unable to decipher or agree with this view of the adjudicating authority. In a principal-to-principal transaction, the appellant purchases the cars/products from the Company by paying the sale consideration. The appellant then becomes the owner of such cars / products and then resells it to its customers. In such process, there cannot be any activity of promoting the sales of M/s. Volkswagen or M/s. Castrol India Ltd. The appellant would be Page 7 of 11 Service Tax Appeal Nos. ST/21134/2015, 20181, 20182/2019, ST/20453/2021 interested to sell more cars to make profit for themselves. The incentives offered for achieving targets of sale cannot be said to be incentives for promoting the sale of M/s. Volkswagen as the appellant is interested to do more sales for their own benefit of making more profit. It cannot be said that they promote the sales of M/s. Volkswagen or M/s. Castrol India Ltd. The incentives depend on the targets achieved which the appellant is interested to achieve as they would earn more profit. Even if there was no such incentive the appellant would be attentive and focused to sell cars to their maximum possible. The incentive is not in the nature of any consideration for providing services to M/s. Volkswagen and M/s. Castrol India Ltd.
6.4. The Tribunal in the case of M/s. S.K. Cars India (P) Ltd. Vs. Commissioner of GST and CE, Salem, 2023-VIL-488 CESTAT, Chennai-ST had occasion to consider a similar issue. It was held that the incentive / discount are in regard to sales transaction and cannot be subject to service tax.
"7. The first issue is in regard to the demand of service tax on the incentives received by the appellant from the manufacturer for sale of cars. The definition of Business Auxiliary Services under Section 65 (19) of the Act ibid is reproduced as under:
"Business Auxiliary Services" means:- any service in relation to--
(i) Promotion or marketing or sales of goods produced or provided by or belonging to the client; or
(ii) Promotion or marketing of service provided by the client; or
(iii) Any customer care service provided on behalf of the client; or
(iv) Procurement of goods or services which are inputs for the client; or Explanation:- for the removal of doubts, it is hereby declared that for the purposes of this sub-clause,"
input means all goods or services intended for use by the client.
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Service Tax Appeal Nos. ST/21134/2015, 20181, 20182/2019, ST/20453/2021
(v) Production or processing of goods for, or on behalf of, the client;
(vi) Provision of service on behalf of the client; or
(vii) A service incidental or auxiliary to any activity specified in sub- clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, Inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision and includes services as commission agent, but does not include any activity that amounts to manufacture of excisable goods.
Explanation. For the removal of doubts, it is hereby declare that for the purposes of this clause, ...
(a) "commission agent" means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person -
(i) Deals with goods or services or documents of title to such goods or service; or
(ii) Collects payment of sale price of such goods or services; or
(iii) Guarantees for collection or payment for such goods or services; or
(iv) Undertakes any activities relating a such sale or purchase of such goods or services;
(b) "excisable goods" has the meaning assigned to it in clause (d) of section 2 of the Central Excise Act, 1944;
(c) "manufacture" has the meaning assigned to it in clause (f) of section 2 of the Central Excise Act, 1944."
10. The Learned Authorised Representative (AR) for the Revenue reiterated the finding in the impugned order and submitted that the Page 9 of 11 Service Tax Appeal Nos. ST/21134/2015, 20181, 20182/2019, ST/20453/2021 Adjudication Authority rightly held that the Appellant is liable to pay service tax.
11. Heard both sides and perused the records.
12. We find that the issue is squarely covered by catena of decisions including the judgment of Hon'ble Supreme Court in the matter of M/s. Tata Motors Ltd., Vs. DC, Commercial Taxes (SPL) 2023 (6) Centax 139 (SC), wherein it is held that:-
"69. In view of the above, the transaction between the manufacturer and dealer while acting pursuant to a warranty in the circumstances explained above has to be construed as sale within the meaning and definition of sale under the Sales Tax Acts under consideration.
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(iii) It is reiterated that a credit note issued by a manufacturer to the dealer, in the situations explained above, is a valuable consideration within the meaning of the definition of sale and hence, exigible to sales tax under the respective State enactments of the States under consideration. In the result, appellants-dealer/assessee are liable to pay sales tax under the respective State enactments under consideration.
(iv) In view of the above, the appeals filed by the dealers are dismissed. The appeals filed by the revenue are allowed. Parties to bear their respective costs."
13. We find that the issue is also squarely covered by the Final order of this Tribunal in the case of M/s. Jubilant Motors (South) Pvt., Ltd., (supra).
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Service Tax Appeal Nos. ST/21134/2015, 20181, 20182/2019, ST/20453/2021
14. In view of the above, the Appeal Nos. ST/21134/2015, 20181, 20182/2019, filed by the Appellant are allowed with consequential relief, if any, in accordance with law. Appeal No. 20453/2021, filed by the Revenue is dismissed.
(Order pronounced in open court on 29.10.2024) (P. A. Augustian) Member (Judicial) (Pullela Nageswara Rao) Member (Technical) Sasidhar...
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