The Mumbai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the Service Tax is not payable on Discounts offered by car manufacturers to their dealers for onward transmission to corporate customers.
The appellant, Autobahn Enterprises Pvt Ltd was an authorized dealer of M/s Skoda Auto India Pvt Ltd and, in accordance with their agreements, 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 demands were confirmed by the original authority under section 73 of Finance Act, 1994, along with interest thereon under section 75 of Finance Act, 1994, while imposing a penalty of like amount under section 78 of Finance Act, 1994.
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.
The Coram of Judicial Member Ajay Sharma and Technical Member C J Mathew relied on the decision of Toyota Lakozy Auto Pvt Ltd v. Commissioner Service Tax, Mumbai –II & V and set aside the demand of Rs. 3,70,994/-, along with interest, and penalty under section 78 of Finance Act, 1994.
The Tribunal 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 to invoking section 78 of Finance Act, 1994 is relevant. The Tribunal found that the invoking of the extended period for the purpose of imposition of penalty was not sustainable.
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