The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) quashed service tax demand, thereby observing that the incentives given to Audi authorised service station is not business auxiliary services ( BAS ).
It appeared that appellant was availing input service tax credit in respect of services which are used by them in their show room and their service centre. These show rooms and service centres are engaged in the activity of trading in cars / spares / accessories as well as providing taxable service. Thus, it appeared that appellant was availing ineligible CENVAT credit on certain common input services used for taxable services and trading and utilizing the same towards payment of their service tax liability.
The counsel for the appellant contended that for the period up to 01.07.2012, the Impugned Order has given a finding that the Appellant carries out the activities only on behalf of Volkswagen and that these definitely promote the products of Volkswagen. Hence, these activities undertaken for incentives are covered by the definition of ‘Business Auxiliary Services’ under Section 65(19) read with Section 65 (105) (zzb) of the Finance Act. However, SCN did not specify the category/sub-clause under which the service in question will be covered under Section 65(19) of the Finance Act.
The Appellant submitted that for the period prior to the Business Transfer Agreement, tax can be demanded only from JMWPL and not the Appellant. Hence, the demand of service tax for the period up to 20th December 2015 is liable to be set aside on this count.
It is argued by the AR that the incentives are given to the appellant for promoting the business / sales of M/s. Volkswagen and therefore these incentives are nothing but consideration received for providing Business Auxiliary Services. So in the case of incentives received by appellant from M/s. Castrol India are for providing sales promotion of castrol products. The confirmation of demand of service tax under Business Auxiliary Services is correct and proper.
A Two-Member Bench comprising Vasa Sehagiri Rao, Technical Member and Sulekha Beevi CS, Judicial Member observed that “For the period after 01/07/2012, the demand has been made under the definition of service under Section 65 (44) B. We have already concluded that there is no element of service. The incentives are purely on the basis of sales and not for providing service of promoting the business of M/s. Volkswagen / Castrol India. The demand made after 01/07/2012 also is not sustainable. From the above discussions and following the decision as above we have no hesitation to hold that the demand of service tax raised on incentives / discounts from M/s. Volkswagen and M/s. Castrol cannot sustain and requires to be set aside. Ordered accordingly.”
“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” the Bench noted.
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