S.M. Autokraft Pvt. Ltd Vs Commissioner of CGST & Central Excise (CESTAT Kolkata)
Summary: The appeals were filed against orders confirming Service Tax demands, interest, and penalties for two periods: February 2012 to March 2014 and 2014–15 to 2015–16. The demands were raised on the allegation that the appellant, an automobile dealer, had received “commission” from the manufacturer and failed to pay Service Tax under the category of Business Auxiliary Service. Both show cause notices (SCNs) invoked the extended period of limitation.
The appellant operated as an authorised dealer for sale of vehicles under an agreement executed on a “principal to principal” basis. Under this arrangement, the appellant purchased vehicles from the manufacturer and sold them to customers. The difference between purchase and sale price constituted its profit margin. The appellant also received incentives and reimbursements of discounts based on sales performance and customer offerings. It was already registered under Service Tax and had been paying tax on taxable services such as repair and maintenance, while filing regular ST-3 returns.
The Department relied on Income Tax returns and higher turnover disclosed therein to allege that the appellant earned commission and failed to discharge Service Tax. The appellant contended that the margin between purchase and sale price was profit from trading activity and not commission. It further argued that incentives and discounts received from the manufacturer were trade-related and formed part of sale transactions, not consideration for any service. It was also submitted that trading of goods falls under the negative list and is not liable to Service Tax.
