Custom, Excise & Service Tax Tribunal
Toyota Lakozy Auto Pvt. Ltd vs Mumbai Ii / Mumbai V on 26 May, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS: ST/81 & 149/2012
CROSS-OBJECTION NOS: ST/CO-63 & 77/2012
[Arising out of Order-in-Original No: 33-36/ST/II/WLH/2011 dated 22/12/2011 passed by the Commissioner of Service Tax, Mumbai II and 392/28/V/2011/Commr/KS/ST dated 18/11/2011 passed by the Commissioner of Central Excise (Appeals), Pune II.]
For approval and signature:
Honble Shri Ramesh Nair, Member (Judicial)
Honble Shri C J Mathew, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
No
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Toyota Lakozy Auto Pvt. Ltd.
Appellant
Versus
Commissioner of Service Tax/Central Excise
Mumbai II / Mumbai V
Respondent
Appearance:
Shri S.B. Gabhawala, Chartered Accountant for the appellant Shri Roopam Kapoor, Commissioner (AR) for the respondent CORAM:
Honble Shri Ramesh Nair, Member (Judicial) Honble Shri C J Mathew, Member (Technical) Date of hearing: 26/05/2016 Date of decision: 17/11/2016 ORDER NO: ____________________________ Per: C J Mathew:
The appellant, M/s Toyota Lakozy Auto Private Limited, is a dealer of M/s Toyota Kirloskar Motor Ltd and has executed a dealership agreement enumerating the various obligation and rights arising therefrom. Dealers procure vehicles on payment of cost and it is claimed that the earnings of the dealer arise from the difference between the discounted price at which vehicles are offered by the manufacturer and the price at which the appellant sells to customers.
2. Separate appeals have been preferred against two orders-in-original pertaining to the period from July 2004 to March 2007 and from April 2007 to March 2011. The demands confirmed in the two appeals are ` 1,58,69,430 and ` 1,57,12,236; the impugned order holds appellant liable to tax on commission earned on sale of cars, on facilitation charges collected from customers for registration of vehicles and commission foregone on loans marketed by appellant to customers. It is the contention of the appellant that these are not consideration leviable to tax and that, even if these are, the adjudicating authority has erred in computing the tax liability. As the issues in the two appeals are common, we dispose both by a common order.
3. Appellant contends that ` 81,35,813 and ` 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. Learned Chartered Accountant for appellant places reliance in the decisions of the Tribunal in Jaybharat Automobiles Limited v. Commissioner of Service Tax, Mumbai [2015-TIOL-1570-CESTAT-MUM], Sai Service Station Limited v. Commissioner of Service Tax, Mumbai [2013-TIOL-1436-CESTAT-MUM], Tradex Polymers Private Limited v. Commissioner of Service Tax, Ahmedabad [2014 (34) STR 416 (Tri-Ahmd)] and Garrisson Polysacks Private Ltd v. 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 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 issue 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 assessee respondent is the authorized dealer of 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. Learned 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.
5. Appellant charges a fee from customers for the registration of their vehicles with the Regional Transport Officer (RTO). The impugned orders have held that ` 35,80,777 and ` 29,75,772 are due as taxes for rendering of business auxiliary services. Learned Chartered Accountant draws our attention to the decision of the Tribunal in Wonder Cars Pvt Ltd v, Commissioner of Central Excise, Pune - I [2016-TIOL-190-CESTAT-MUM]. This Tribunal, in its recent order in M/s Arpanna Automotives Pvt Ltd v. Commissioner of Customs & Central Excise [Final order no. A/85827 85828/16/STB dated 3rd February 2016], held that 7. In our considered view helping the purchaser with registration with the RTO, cannot be any considered by Business Auxiliary Service, in view of the foregoing, we hold the Service Tax demand of the amount retained by the appellant in respect of RTO registration fees is not sustainable. The impugned order is set aside. This Bench in the case of Wonder Cars Pvt. Ltd. Vs. Commissioner of Central Excise, Pune-I 2016-TIOL-190-CESTAT-MUM has held that amount collected as extra charges for RTO registration is not covered under support services of business and commerce.
8. In view of the foregoing, the Service Tax liability confirmed under Business Auxiliary Service for the amount of RTO registration fees is set aside. As regards the penalty imposable, we find the Service Tax liability of the amounts received from the various financial institutions, whether is taxable otherwise was settled by the Larger Bench, there were two different streams of the decisions contradicting each other. As the issue needs to be settled by the Larger Bench, the appellant having discharged Service Tax liability and interest thereon, this is a fit case for invoking Section 80 of the Finance Act, 1994 to set aside penalties. Invoking the provisions of the Section 80 of the Finance Act, 1994, we set aside the penalties imposed by the adjudicating authority.
6. The appellant is before us in an identical situation and we, therefore, set aside this portion of the demand also.
7. Appellant, admittedly, assists customers who desire to have their vehicles financed by bringing financial institutions and buyers together. For this, financial institutions offer them a commission on the loan amount sanctioned of which a portion is passed on the customer as an upfront subvention of the total interest payable. The appellant pays tax only on the actual commission received and the impugned order has confirmed tax of ` 18,28,528 and ` 3,80,825 for the two periods in dispute. Learned Authorized Representative relies upon Jaybharat Automobiles Limited v. Commissioner of Service Tax, Mumbai [2015-TIOL-1570-CESTAT-MUM] to contest the claim of appellant that the subvented component is not received as consideration by appellant. Further reliance was placed on Joshi Auto Zone Pvt Ltd v. Commissioner of Central Excise, Chandigarh [2016 (42) STR 739 (Tri-Del)] and on HBL Global Pvt Ltd v. Additional Commissioner of Income Tax [ITA No. 386/Mum/10]. Learned Chartered Accountant has sought to distinguish the factual position in these cases from those of the appellant.
8. We have perused the decisions cited by both sides. One of the essential requirements in taxing of services is the existence of service-provider and recipient of service with the latter making over the agreed upon consideration to the former. Appellant, admittedly, markets products of financial institutions for which they are entitled to a commission. There is common ground here on the taxability of commission as received. However, the appellant claims to have waived a portion of the commission otherwise receivable which the bank then uses to reduce the consideration that it receives for such financing from customers. It would appear that consideration not received by the appellant from the financial institutions for one service is adjusted to compensate for the reduced consideration received by the financial institution for another service rendered to another recipient. The manner in which the financial institution treats these outflows of commission and inflow of interest would unlock the proper perspective of consideration in these transactions, particularly, the one between the appellant and the financial institution. This is an aspect that has not been attended to in the impugned order.
9. Likewise the contention of the appellant that there are errors in computation among which are inclusion of the amounts not received during the period when tax was leviable only on receipts, the non-adjusted excess tax paid in the half-yearly returns in comparison with financial statements, inclusion of bad debts and reversals in the taxable value and the inclusion of credit entries without netting the debit entries. These are crucial to determination of taxable value and will have to be considered.
10. To enable a re-visit of the taxability of subvented amounts as well as the above-mentioned accounting entries, we deem it appropriate that the matter be remanded to the original authority for deciding afresh on the last two issues. The other two issues are not the subject of this remand as they stand decided in favour of appellant.
11. The appeals are accordingly disposed off. Cross-objection also disposed off.
(Pronounced in Court on 17/11/2016) (Ramesh Nair) Member (Judicial) (C J Mathew) Member (Technical) */as 2 8