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2. The issue, in brief, is that M/s Jasper Industries Pvt Ltd (hereinafter referred to as respondent) were approved authorized dealer to resell vehicles and accordingly were buying motor vehicles from M/s Tata Motors ST/30149/2020 Ltd (Tata Motors) on principal-to-principal basis and thereafter re-selling the same to its customers. Additionally, they were also providing certain after- sales services and value added services in respect of said services. The terms and conditions of these purchases and sales as well as after-sales services were in terms of Dealership Agreement dt.10.02.2017. The department felt that the respondents were receiving certain consideration from Tata Motors towards target based incentives and other incentives, viz., exchange bonus, loyalty bonus, scheme/additional discounts etc., which appeared to be consideration towards services rendered by the respondents to Tata Motors and on which no service tax was discharged. Based on perusal of certain financial statements and relevant documents including dealership agreement dt.10.02.2017, as also, the statements of certain persons of respondent, the department felt that, inter alia, certain activities were being performed by the respondents contractually and for which certain considerations were being received from Tata Motors in the nature of target based incentives/discounts as well as non-target based incentives/discounts or other discounts etc. It was also felt that the amounts credited by Tata Motors were not in the nature of reimbursements. Therefore, it was considered that the respondents were committed to provide certain services of promotion of sales and service in respect of vehicles purchased from Tata Motors and also to obtain order therefor. Therefore, the incentives and discounts received from Tata Motors was a consideration towards said service of promotion and other contractual obligations performed by respondents. Therefore, these activities would fall within the ambit of taxable service under section 65B(44) of Finance Act, 1994, and service tax is required to be paid during the period April, 2013 to June, 2017.

17. Learned Advocate for the respondent has further explained that the respondents are receiving various trade discounts and other discounts in terms of various scheme circulars at the time of purchase of vehicles and in such cases, the net dealer price is always discounted price of the product ST/30149/2020 sold. However, their discounts are also regulated in terms of various schemes floated from time to time. During the period April, 2013 to June, 2017, certain target based discounts/other discounts were offered, which were meant both for customers as well as dealers on achieving certain retail targets and additionally, offtake achievements. Therefore, various target based discounts or other discounts were applicable both to the dealers as well as also available to the customers invariably based on certain pre- specified targets at the stage of offtake or at the retail stage in terms of circulars issued from time to time. Insofar as non-target based discounts, they are receiving certain discounts from Tata Motors. These discounts are availed in a manner where the Tata Motors sets the list price of the vehicle and the same price is quoted by the respondent to the ultimate customer and certain discounts are offered by Tata Motors on the list price, a portion of which is reimbursed by Tata Motors, though initially borne in full by the respondents. Therefore, the final price at which the vehicle is sold to the end customer is the price, which is arrived at after taking into account the discounts offered both by the respondent and Tata Motors. Therefore, essentially, this mechanism is regulated through a credit note raised in favour of the customer, whereas, the debit note is raised by the respondent to the Tata Motors seeking reimbursement of the same and therefore, the effect of the whole transaction is that the respondent purchases the vehicle from the manufacturer at a reduced price and subsequently, the vehicle is sold at a reduced price to the customer.

25. We have also perused the judgments relied upon by the adjudicating authority. In the case of Toyota Lakozy Auto Pvt Ltd Vs CST, Mumbai (supra), Tribunal relied on the judgment in the case of CST, Mumbai Vs Sai Service Station Ltd (supra) and also CST, Mumbai Vs Jaybharat Automobiles Ltd (supra) and held that discounts received on purchase of vehicles are not liable to service tax. The judgment in the case of Jaybharat Automobiles Ltd (supra) and Sai Service Station Ltd (supra) clearly held that such trade discounts/incentives are not taxable as BAS but essentially it was not treated as transaction relatable to sale. Para 3 & 4 of the judgment are cited below.

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."

26. Thus, reliance placed on judgments like Sharyu Motors Vs CST, Mumbai (supra) and CST, Mumbai Vs Jaybharat Automobiles Ltd (supra) are relavant to hold that said incentives/discounts received under various schemes were in relation to sale and hence not leviable to service tax.