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PJ/Case Laws/2012-13/1448

Whether incentives received on quantum of motor vehicles purchased from M/s Tata Motors is liable to Service Tax under 'BAS’?

Case:-JAIKA MOTORS LTD V/S COMMISSIONER OF CUSTOMS, CENTRAL EXCISE, NAGPUR
 
Citation:- 2013-TIOL-73-CESTAT-MUM

Brief Facts: - The appellant filed this application for waiver of pre-deposit of service tax of Rs.2,30,19,887/- The applicant has already paid Rs.29,41,200/- which is in respect of the commission received. The demand of service tax of Rs.2,30,19,887/- is confirmed on amount received in respect of incentive under the head ‘Business Auxiliary Service'.

Appellant’s Contention: - The appellant contended that they are authorized dealers of M/s. Tata Motors. They are purchasing and selling motor vehicles manufactured by M/s Tata Motors. M/s Tata Motors provides incentives in respect of the quantum of motor vehicles purchased by them. The demand is confirmed on the ground that as they are providing business auxiliary service and incentive received is a consideration. The contention of the applicant is that the incentive received has nothing to do with the business auxiliary service. It is in respect of the motor vehicles which were purchased by them on which appropriate duty has already been paid. Therefore, such incentive cannot be charged under the head business auxiliary service. The applicant relies upon the decision of the Tribunal in the case of M/s Uttam Toyota vs Commissioner of Central Excise, Ghaziabad reported in 2011 (22) STR 425 (Tri-Del) = (2011-TIOL-537-CESTAT-DEL) whereby the Tribunal waived the pre-deposit of service tax which was confirmed on the same ground. The contention of the applicant is that in view of the earlier stay order passed by the Tribunal on the same ground, they have a strong prima facie case for total waiver. They also pleaded that the demand is time barred. In August 2008 audit was conducted and a Show Cause Notice was issued demanding service tax on the same ground without raising the issue and the Tribunal remanded the matter to the adjudicating authority which is pending. Hence the allegation of suppression is not sustainable.
 
Respondent’s Contention: - The respondent argues that the adjudicating authority had gone through the terms and conditions of the dealer's agreement which shows that the applicants are providing business auxiliary service in respect of sale of the motor vehicles manufactured by M/s Tata Motors. The contention of the Revenue is that the sale of motor vehicles by M/s Tata Motors is not at arms length. In fact, the applicants are agents of M/s Tata Motors. Therefore, the demand is rightly made. In respect of the time bar issue, the contention of the Revenue is that as the applicants had not disclosed the receipt of the amount of incentive in their statutory returns. Hence there is suppression of facts.
 
Reasoning of Judgment: - The Hon’ble High Tribunal held that the applicants are purchasing motor vehicles from M/s Tata Motors and selling. The applicants are receiving the amount as incentive in respect of the quantity of motor vehicles purchased by the applicants. The Tribunal in the case of Uttam Toyota (supra) waived pre-deposit of the dues which were confirmed on the same ground. In view of the above stay order, they find that the applicants have made out a prima facie case for total waiver of pre-deposit. Pre-deposit of the dues is waived and recovery therefore stayed during the pendency of the appeal.

Decision: - The stay petition was allowed.

Comment:-It is commonly observed that the literal words are taken to raise service tax demand as it is done in the instant case. The incentive received by the assessee has been held as commission taxable under BAS even when there is no principal agent relationship.

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PRADEEP JAIN, F.C.A.

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