In AUTOBAHN ENTERPRISES PVT. LTD. v. COMMISSIONER OF SERVICE TAX, [FINAL ORDER NO: A /8673 /2021 dated September 07, 2021], Autobahn Enterprises Pvt. Ltd. (“the Appellant”) was an authorized dealer of M/s Skoda Auto India Pvt Ltd. and in accordance with their agreements, the Appellant was allowed to offer discounts on the sale of vehicles to their corporate customers to be reimbursed to them and had facilitated banks and financial companies, as well as insurance companies, to service loan and insurance requirements of customers from their premises.
The Appellant contended that the dispute pertaining to discounts offered by car manufacturers to their dealers for onward transmission to corporate customers was not liable to tax as promotion or marketing or sale of goods produced or belonging to clients’ within the enumeration of ‘business auxiliary service’ in section 65(19) of Finance Act, 1994. and the demand of ₹ 3,70,994/- along with interest and penalty under section 78 of Finance Act, 1994 is not valid.
The Hon’ble CESTAT, Mumbai relied on the decision of Toyota Lakozy Auto Pvt. Ltd. v. Commissioner Service Tax and Jaybharat Automobiles Limited v. Commissioner of Service Tax in which it was held that the relationship between the Appellant and the dealer is on a principal to principal basis. 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.
The Hon’ble CESTAT then noted the decision in Gemini Mobiles Pvt. Ltd v. Commissioner of Central Excise & Service Tax, Lucknow for arriving at the conclusion of circumstances not being conducive for invoking section 78 of Finance Act, 1994.
Then Hon’ble CESTAT, Mumbai in the present case ruled that finality was accorded to tax liability by circular no.87/05/2006-ST dated November 06, 2006 of the Central Board of Excise and Customs. And in view of the circumstances and the stand taken by the Tribunal in these several decisions, invoking of the extended period for the purpose of imposition of penalty is not sustainable. Accordingly, the penalty imposed under section 78 of Finance Act, 1994 is also set aside.
Online GST Course by Bimal Jain
Recorded: Certified Advanced GST Course
Course Details: Certificate of Participation will be Provided, Free GST Updates on E-mail, WhatsApp, Telegram for 1 Year, Background Material and PPT will be Provided on the downloadable basis, Total 21 Recorded Sessions (60 Hours), will be available for 120 hours or 60 Days whichever expires earlier.
For Registration:- https://cutt.ly/hxjl5Cu
Recorded: GST Course on Exports, Deemed Exports, SEZ, Imports, Merchandise Exports, Inverted Duty Structure (including Refunds)
Course Details: 6 Online Recorded Sessions of 2.30Hrs each with Background Material (BGM)
For Registration:- https://cutt.ly/pvw7mzl
For more details, Call: +91-8076563802, E-mail: firstname.lastname@example.org, Web: www.a2ztaxcorp.in
DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.