The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that the Service tax under Business Auxiliary Services (BAS) is not leviable Incentives from manufacturers for the sale of cars.
The appellant, M/s. S.K. Cars India (P) Ltd, is engaged in the business as a dealer of four-wheeler motor cars of M/s. Maruti Udyog Ltd. is registered as a service provider of servicing of motor vehicles, business auxiliary services and goods transport agency services.
Show cause notice was issued proposing to demand services tax on the incentives received by them. After due process of law, the original authority confirmed the demand along with interest and imposed a penalty. Aggrieved by such order, the appellant is before the Tribunal.
D. Jaishankar appeared and argued for the appellant. The Counsel submitted that the relationship with M/s. Maruti Udyog Ltd. being of buyer and seller on principal to principal basis, the incentives/discounts received by the appellant for reaching the sale targets cannot be subject to levy of service tax under the category of Business Auxiliary Services.
The Counsel further submitted that the discounts/incentives are given by the manufacturer only for the purchase of vehicles from them in order to achieve the sales target or prompt payment. Such a type of discount is called a bonus or incentive and need not be included in the taxable value, as there are no services rendered.
In M/s. Rohan Motors Ltd. Vs Commissioner of Central Excise, Deharadun, wherein the assessee was the dealer who purchased the vehicles from the M/s. Maruti Suzuki India Ltd and subsequently sold the same to various customers. It was held that the incentive/discount in regard to sales transactions cannot be subject to service tax.
A Two-Member Bench of the Tribunal comprising CS Sulekha Beevi CS, Judicial Member and M Ajit Kumar, Technical Member observed that “We hold that the incentives received by the appellant cannot be subject to levy of service tax under the category of Business Auxiliary Services.”
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