Case Law Details
Jaika Motors Ltd. Vs Commissioner of Central Excise (CESTAT Mumbai)
Introduction: In the case of Jaika Motors Ltd. vs. Commissioner of Central Excise, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Mumbai addressed a service tax demand issued to the appellant for an amount of Rs. 3,93,44,535 along with interest and penalties under the heading ‘Business Auxiliary Service’ due to the receipt of incentives related to the sale of goods. The appellant, engaged in selling cars and providing various services as an authorized service station for Tata Motors, received incentives but did not pay service tax on these amounts. This appeal specifically pertains to the period from 1st April 2013 to 31st March 2014.
Detailed Analysis: During the appeal hearing, the appellant’s Chartered Accountant, Mr. Shalilendra Jain, argued that this issue had already been addressed in previous decisions by the CESTAT, including three orders related to the appellant. He referred to the orders passed by the Tribunal on 23rd May 2018 and 4th November 2016. Mr. Jain contended that these orders, along with other judgments, set a precedent for non-taxability of the incentive amounts.
In response, the Learned AR for the Respondent-Department, Mr. S. B. P. Sinha, supported the Commissioner’s reasoning for the demand. He acknowledged that for the earlier period, the Tribunal had set aside the demands, and the Revenue did not appeal against those decisions.
The Tribunal carefully reviewed the case record and observed that the Commissioner had made a distinction between the present case and previous judgments, arguing that the incentives in this case were paid for the purchase of goods rather than a service. This distinction was found to be erroneous, as the incentives were clearly related to the purchase of vehicles and components, making them incentives for the sale of goods, not services.
Conclusion: CESTAT Mumbai, in the case of Jaika Motors Ltd. vs. Commissioner of Central Excise, quashed the service tax demand on incentive amounts. The tribunal followed its own judicial precedent, ensuring consistency and predictability in its orders and providing relief to the appellant. This ruling clarifies the taxability of incentives based on the nature of the transaction and its relation to the sale of goods or services.
FULL TEXT OF THE CESTAT MUMBAI ORDER
Conformation of Service Tax demand against the Appellant for Rs.3,93,44,535/- alongwith interest and penalties under Sec 77 and 76 of the Finance Act, 1994 under the heading ‘Business Auxiliary Service’ by the Commissioner on the amount received by it as incentive in respect of sale of goods is assailed in this service.
2. Brief fact of the Appellant’s case is that it is a dealer of M/s Tata Motors engaged in sale of cars and providing service as authorized service station to the car purchasers of Tata Motors as well as other related services including arrangement of finance etc. against which it has been receiving commission and paying Service Tax for the service component under the heading ‘Business Auxiliary Service’ as defined under Section 65 of the Finance Act, 1994. During scrutiny of records and reconciliation of the amount received by the noticee, it was observed that Appellant had received incentives from M/s Tata Motors Ltd. but had not paid Service Tax on the incentive amount. Accordingly, for the initial period between 2005 to 2010 show cause notice was issued demanding Service Tax on the incentive amount with interest, penalty etc. and for subsequent Financial years Statement cum Show Cause notices were issued. This appeal relates to the period from 1.04.20 13 to 31.03.2014.
3. During course of hearing of this appeal Learned Chartered Accountant for the Appellant Mr. Shalilendra Jain submitted that the issue is no more res integra in view of several decisions of this Tribunal including three orders passed by this Bench in respect of this Appellant for the prior periods between 04.11.2016 and 23.05.2018. In submitting copies of the order passed by this Tribunal on 23.05.2018 in appeal no. ST/85314/2014 and appeal no. ST/282,652/2012 passed by this Tribunal on 04.11.2016, he further submitted that placing reliance on previous judgment passed by this Tribunal including the order in M/s Sai Service Station ltd., reported in 2014 (35) STR 625 (Tri-Mum) and My Car Pvt. Ltd. reported in 2015 (40) STR 1018 (Tri-Del), these two orders were passed and the present appeal corresponds to the subsequent period notice issued under Section 73 (1A) of the Finance Act, 1994 that has reference to the grounds raised in the earlier notices and since, demand against those notices were set aside, the present conformation of demand by the Commissionerate is also liable to be set aside.
4. In response to such submissions, Learned AR for the Respondent-Department Mr. S. B. P. Sinha argued in favour of the reasoning and rationality of the order passed by the Commissioner while acknowledging that for the earlier period Tribunal has set aside the demands against which reportedly no appeal is filed by the Revenue so
5. We have gone through the case record and relied upon It is noticed that Learned Commissioner had distinguished the ratio of M/s Sai Service Station Ltd., cited (Supra) in stating that in that case incentives were paid in connection with sale of excisable goods by the manufacturer to the dealer which were held as ‘trade discount’ but the same is not the situation in case of the present Appellant. Such an observation appears to be erroneous for the reason that in the summary of the incentive received, which is annexed to the notice under Sec 73 (1A), clearly indicates that against purchase of 4 items namely vehicles and it’s components, incentives were given to the Appellant and the same can’t be considered as paid against any service since paid against sale of goods. This being the facts on record and in carrying forward the judicial precedent set by this Tribunal and in order to ensure consistency and predictability to the orders passed by this Tribunal, the following order is passed.
THE ORDER
6. The appeal is allowed and the order passed by the Commissioner in Order-in-Original No. 47/ST/NGP-II/2015/C dated 30.11.2015 is hereby set aside with consequential relief, if any.
(Order pronounced in the open court on 16.10.2023)
