M/s T.M Motors Pvt. Ltd., is a dealer of Maruti Suzuki Ltd., who not only sells cars but also undertakes the servicing thereof. During audit revenue raised a demand under ‘business auxiliary service’ category in respect of – the commission received from various financial institutions for promoting their loan schemes, the discounts / rebates / incentives received on the basis of various targets achieved; and the price of various consumables / spare parts recovered from customers during servicing. Revenue also demanded reversal of CENVAT credit in respect of common input services utilized in trading activity of Maruti cars.
CESTAT relied upon the decision of Mumbai bench in Toyota Lakozy Auto Pvt. Ltd. [2017 (52) STR 299 (Tri. –Mumbai)] to set aside the demand. In said case, the bench had referred to coordinate bench ruling in Jay bharat Automobiles Limited vs. Commissioner of Service Tax, Mumbai [2016 (41) S.T.R. 311 (Tri.) TS-425-CESTAT-2015-ST] wherein it was held “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.” In this regard, the bench relied on its earlier decision in Sai Service Station Limited vs. Commissioner of Service Tax, Mumbai [2014(35) STR 625 (Tri.)] where it was observed that since the incentive targets were as per the circular issued by MUL, they could not be treated as business auxiliary service.
CESTAT referred to the bench In the case of Krishna Swaroop Agarwal where is was held that service tax was not required to be paid on sale of goods, as the Assessee had been paying VAT on spare parts / consumables sold to customers while providing service, therefore the demand was unsustainable. With regards to the demand for reversal of CENVAT credit under Rule 6(3) of common input services used in trading activity, CESTAT notes that entire amount had been reversed by assessee and in terms of Allahabad HC decision in Helo Minerals Water Pvt. Ltd, subsequent credit reversal amounts to non-taking of credit. However, CESTAT upholds the demand along with interest in respect of commission received from financial institutions for promoting their loan schemes, however waives penalty in terms of Section 80.
Citation: [ TS-390-CESTAT-2018-ST ]