Custom, Excise & Service Tax Tribunal
T M Motors Pvt Ltd vs Alwar on 22 June, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL,
WEST BLOCK NO.2, R.K. PURAM, NEW DELHI-110066
BENCH-DB
COURT -II
Service Tax Appeal No. ST/53009/2015-CU[DB]
[Arising out of Order-in-Original No. ALW-EXCUS-000-COM-
004-15-16 dated 20.05.2015 passed by the Principal
Commissioner, Central Excise, Alwar]
M/s T.M. Motors Pvt. Ltd. ...Appellant
Vs.
C.G.ST C & C.E., Alwar ... Respondent
Present for the Appellant : Mr. M.D. Maheshwari, Advocate Present for the Respondent: Mr. G.R. Singh, D.R. Coram: HON'BLE MR. V.PADMANABHAN, MEMBER (TECHNICAL) HON'BLE MRS. RACHNA GUPTA, MEMBER (JUDICIAL) Date of Hearing: 15.06.2018 Pronounced on : 22.06.2018 FINAL ORDER NO. 52348/2018 PER: V. PADMANABHAN The present Appeal challenges the Order-in-Original No. 04/2015-16 dated 30.04.2015. The appellant is engaged as a dealer of Maruti cars. They not only sell cars manufactured by M/s Maruti Suzuki Ltd. but also undertake the servicing thereof. The Department while carrying out the audit of the accounts of the appellant noticed that the appellant has failed to pay the service tax on certain receipts. Accordingly, the 2 Service Tax Appeal No. ST/53009/2015-CU[DB] Show Cause Notice dated 17.10.2014 was issued proposing to demand service tax under various grounds. The Show Cause Proceedings were concluded with the issue of the impugned order in which the service tax demands were upheld and aggrieved by the same the present Appeal stands filed.
2. In this connection, we heard Shri MD Maheshwari Ld. CA of the appellant as well as Shri G.R. Singh, DR.
3. The demand for service tax has been made on the following grounds:-
(a) The appellant received certain commissions from various financial institutions for promoting their loan schemes for purchase of Maruti cars by the customers. Department was of the view that the commissions received were liable to payment of service tax under the category of business auxiliary service.
In this connection, the Ld. Counsel submitted that the appellant is not pressing this ground. The service tax amount has already been paid by them, which has also been appropriated in the impugned order. But the Ld. DR submitted that the appellant will be liable to pay penalty under Section 78 of the Finance Act, 1994 for the amount of service tax admitted and paid.
3
Service Tax Appeal No. ST/53009/2015-CU[DB] After considering both sides, we uphold the demand on this ground in as much as the same is not contested. Any interest payable on such delayed payment of service tax is also upheld. In the circumstances of the case, we waive the penalty by taking recourse to Section 80 of the Finance Act, 1994.
(b) While acting as a dealer for Maruti cars, the appellant receives certain amount by way of rebates/ discounts/ incentives in the price of the car. Some of these incentives are received by the appellant on the basis of various target based incentives permitted by the manufacturers of the cars. The Department was of the view that the appellant is required to pay service tax on such discounts received under the category of business auxiliary service.
The Ld. Counsel submitted that the discounts/ incentives received by the appellant from the manufacturer of cars will not be liable for payment of service tax. In this connection, he relied on the decision of the Tribunal in the case of Toyota Lakozy Auto Pvt. Ltd. reported as 2017 (52) STR 299 (Tri.-Mumbai).
We have considered the decision of the Tribunal (supra) wherein the Tribunal observed as follows: 4
Service Tax Appeal No. ST/53009/2015-CU[DB] ―3. Appellant contends that Rs. 81,35,813/- and Rs. 1,21,47,133/- for the two periods has been wrongly subjected to tax because the agreement between the appellant and M/s Toyota Kirloskar Motor Limited is one of supply of vehicles by the latter on ‗principal-to-principal' basis on which title and risk, as per Agreement are passed on to appellant when the vehicles are excise cleared and placed on common carrier. Depending on order quantity, the manufacturer raises invoices after according discounts which are designated as commission/incentive merely as a management terminology. Ld. CA for appellant places reliance in the decisions of the Tribunal in Jaybharat Automobiles Limited vs. Commissioner of Service Tax, Mumbai [2015-TIOL-1570-CESTAT-MUM = 2016 (41) S.T.R. 311 (Tri.)], Sai Service Station Limited vs. Commissioner of Service Tax, Mumbai [2013-TIOL-1436-CESTAT-MUM = 2014(35) STR 625 (Tri.)], Tradex Polymers Private Ltd. vs. Commissioner of Service Tax, Ahmedabad [2014 (34) STR 416(Tri. - Ahmd.)] and Garrisson Polysacks Private Ltd. vs. Commissioner of Service Tax, Vadodara [2015 (39) STR 487 (Tri--Ahmd.)]. In re Jaybharat Automobiles Limited, the Tribunal held that ―6.5 On the appeal by Revenue on the issue of incentives received by the appellant from the car dealer, we find that the relationship between the appellant and the dealer is on a principal to principal basis. Only because some incentives/ discounts are received by the appellant under various schemes of the manufacturer cannot lead to the conclusion that the incentive is received for promotion and marketing of goods. It is not material under what head the incentives are shown in the Ledgers, what is relevant is the 5 Service Tax Appeal No. ST/53009/2015-CU[DB] nature of the transaction which is of sale. All manufacturers provide discount schemes to dealers. Such transactions cannot fall under the service category of Business Auxiliary Service when it is a normal market practice to offer discounts/ institutions to the dealers. The issues is settled in the case of Sai Service Station (supra). Therefore, we reject the appeal of the department.‖ And in re Sai Service Station Limited it was held that ―14. In respect of the incentive on account of sales/target incentive, incentive on sale of vehicles and incentive on sale of spare parts for promoting and marketing the products of MUL, the contention is that these incentives are in the form of trade discount. The assesse respondent is the authorised dealer of a car manufactured by MUL and are getting certain incentives in respect of sale target set out by the manufacturer. These targets are as per the circular issued by MUL. Hence these cannot be treated as business auxiliary service.‖
4. Ld. Authorized Representative reiterates the findings of the adjudicating authority. However, in view of the settled position in the decisions of the Tribunal supra, we hold that the discounts received on procurement of vehicles from the manufacturer are not liable to tax as ‗business auxiliary services' and set aside the demand on that head.‖ By following the decision (supra) we set aside the demand of service tax on this ground.
(c) During the course of carrying out service of the vehicles as an authorised service centre for Maruti cars, the appellant 6 Service Tax Appeal No. ST/53009/2015-CU[DB] also used various consumables/ spare parts. The price of such consumable/ spare parts were also recovered from the customers and Department was of the view that the value of such consumables/ spare parts were also required to be included in the consideration charged by the appellant for carrying out service of the vehicles and accordingly, the Department proposed to demand service tax by including the value of such consumables/ spare parts.
The Ld. Counsel submitted that service tax is not chargeable on the consumables/ spare parts since these have been sold by the appellant, during the course of servicing the vehicle. He further drew our attention to the sample copies of invoices issued by the appellant for servicing of vehicles. From such invoices he pointed out that for the spare parts and consumables sold during the provision of service VAT as appropriate has already been paid. He relied on the decision of the Tribunal in the case of Krishna Swaroop Agarwal 2015 (37) STR 647 (Tri.-Del.) wherein it has been held that service tax is not required to be paid on the sale of goods.
After hearing the Ld. DR also, we perused the cited decision of the Tribunal (supra). The observations of the Tribunal in the case are reproduced below:- 7
Service Tax Appeal No. ST/53009/2015-CU[DB] ―4. We have considered the facts of the case. The Board Circular referred to above in effect actually states that Service Tax is not leviable on the transaction treated as sale of goods and subjected to levy of sales tax/VAT. It is seen that as recorded by the Commissioner (Appeals), respondents were able to establish that amount on which the impugned Service Tax has been demanded actually pertains to the sale of spare parts/ accessories/ consumables like lubricants etc. by showing copies of the VAT assessment orders for the financial years 2006-07 & 2007-08. It would clearly entitle them to the benefit of Notification No. 12/2013-S.T. Indeed even the provisions of Section 67 lay down that the value for the purpose of levy of Service Tax is the gross amount charge for taxable service. Thus, we do not find any merit in the Revenue's appeal which is hereby quashed.‖ In the present case also, we note that the appellant has been paying VAT on the spare parts/consumables sold to the customer while providing service. Hence, we set aside the demand of service tax on this ground.
(d) The appellant has carried out not only service as an Authorised Service Station but also the activity of trading of Maruti cars as well as spare parts. The appellant availed cenvat credit on certain common input services and used the same for payment of service tax under the category of Authorised Service Station. The Department ordered for 8 Service Tax Appeal No. ST/53009/2015-CU[DB] reversal of an amount at the rate of 6% of the value of the exempted service, i.e., trading service, in terms of Rule 6(3) of the Cenvat Credit Rules, 2004.
The Ld. Counsel submitted that this ground is not being pressed. He further submitted that the entire amount of common input services for which cenvat credit was availed has been reversed by the appellant, total amounting to Rs. 2,30,203/-. He also relied on the decision of the Hon'ble Allahabad High Court in the case of Helo Minerals Water Pvt. Ltd. 2004 (174) ELT 422 (Allahabad).
We note that the entire amount of common input service on which cenvat credit has been availed has since been reversed by the appellant. It has been held by the Hon'ble Allahabad High Court in the case of Helo Mineral Waters that subsequent reversal of credit amounts to non taking of credit. By following the decision of the Allahabad High Court (supra), we find no justification for the amount ordered to be paid under Rule 6(3) of the Cenvat Credit Rules. Hence, we set aside the demand on this ground.
The demand of service tax on all the four grounds as above has been challenged in the present Appeal. 9
Service Tax Appeal No. ST/53009/2015-CU[DB]
4. In view of the above discussions, the impugned order is modified and we uphold the demand of service tax on the ground of commission received from financial institutions. Rest of the demand of service tax is set aside. In the result, Appeal is partially allowed.
[Pronounced in the open Court on 22.06.2018] (RACHNA GUPTA) (V.PADMANABHAN) MEMBER (JUDICIAL) MEMBER (TECHNICAL) D.J.