Service Tax Not Applicable On Amount Received As Discount From Vehicle Manufacturer By The Dealer: CESTAT

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the amount received as a discount or incentive from the vehicle manufacturer by the dealer is not liable for service tax.

The two-member bench of Ramesh Nair (judicial member) and Raju (technical member) has observed that a dealer purchased the vehicles from Maruti Suzuki India Ltd. and subsequently sold the same to various customers. The transaction between Maruti Suzuki India Ltd. and the dealer and the subsequent sale transaction between the dealer and the customer is purely on a principal-to-principal basis.

The issue raised was whether the discount given by Maruti Suzuki India Ltd. to the appellant for the sale of vehicles has to be considered as service charges towards business auxiliaries and is liable for service tax.

The appellant/assessee being dealers, purchased the vehicles from Maruti Suzuki India Ltd. and subsequently sold the same to various customers. The transaction between Maruti Suzuki India Ltd. and the dealer and the subsequent sale transaction between the dealer and the customer are purely on a principal-to-principal basis. The vehicle manufacturer, Maruti Suzuki India Ltd., on the basis of the yearly performance of sales, grants the discount to the dealer; this discount is nothing but a discount in the sale value of the vehicle sold throughout the year.

The CESTAT has allowed the appeal and held that no service tax was payable on the discount received by the appellant.

Case Title: B M Autolink Versus C.C.E.-Kutch (Gandhidham)

Citation: Service Tax Appeal No.11812 of 2016

Date: 28.11.2022

Counsel For Appellant: Consultant Vikas Mehta

Counsel For Respondent: Superintendent (AR) Vijay G. Iyengar

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