In a recent case, the Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has held that service tax is not payable on an amount received by an automobile dealer from the manufacturer as a trade discount.
M/s Divine Autotech Private Limited, the appellant/assessee is engaged in ‘Renault cars’ sales and service. It was registered with the central excise department for providing various services and has been paying service tax and filing returns as required.
The assessee received from the manufacturer various discounts for buying cars in bulk and meeting several sales targets. These amounts were recorded in its ledgers, copies of which were provided to the Commissioner during the hearing.
A certificate from the CA was provided along with an undertaking by the DGM Finance of the manufacturer that the amounts given to the appellant are the discount or incentive based on the quantity purchased by the appellant. However, the commissioner confirmed the demand for the amount.
The assessee contended that incentives received from manufacturers of automobiles are trade discounts and not subject to service tax payment.
The two-member bench of Binu Tamta (Judicial Member) and P. V. Subba Rao (Technical Member) has observed that any amount received by an automobile dealer from the manufacturer as a trade discount, including a quantity discount (which is a trade discount given based on volume of purchase), are not amounts received for providing any taxable service but purely discounts received on account of the trade and meeting certain sales targets.
While allowing the appeal, the CESTAT Tribunal held that the amounts cannot be charged to service tax and set aside the demand.
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