In Service Tax Appeal No.40681 of 2013 -CESTAT- CESTAT (Chennai) rules in favour of S.K. Cars India; holds incentives and reimbursement of advertisement charges not liable for Service Tax
Members Sulekha Beevi C.S. (Judicial) & M. Ajit Kumar (Technical) [05-06-2023]

Read Order: S.K. Cars India (P) Ltd v. Commissioner of GST & Central Excise

Chahat Varma

New Delhi, June 16, 2023: The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal has ruled that the incentives received by S.K. Cars India (P) Ltd.  (appellant) and the reimbursement of advertisement charges, cannot be subjected to the levy of service tax under the category of Business Auxiliary Services.

Briefly stated, the appellant, a dealer of four-wheeler motor cars and registered service provider, received reimbursement of advertisement charges from M/s. Maruti Udyog Ltd and M/s. Sundaram Finance Ltd for various promotional activities. The Department contended that such advertisement charges would fall within the ambit of Business Auxiliary Services under Section 65(19) of the Finance Act, 1994. A Show Cause Notice was issued to the appellant, proposing to demand services tax on the incentives received by them and the reimbursement of advertisement charges. The Original Authority confirmed the demand along with interest, and imposed penalty.

The coram of Sulekha Beevi C.S. (Judicial) and M. Ajit Kumar (Technical) referred to the case of BM Autolink Vs Commissioner of Central Excise, Kutch [LQ/CESTAT/2022/1201], wherein the Tribunal had observed that transaction between M/s. Maruti Suzuki India Ltd. and the dealer, as well as the subsequent sale transactions between the dealer and customers, were purely on a principal-to-principal basis. The discounts provided by M/s. Maruti Suzuki India Ltd. to the dealer were considered as discounts in the sale value of the vehicles, and they occurred throughout the year in the course of the sale and purchase transactions. Therefore, these discounts cannot be considered as a service for the levy of service tax.

The bench further placed reliance on the judgment rendered by the Supreme Court in the case of Union of India v. M/s Intercontinental Consultants and Technocrats Pvt. Ltd. [LQ/SC/2018/306], wherein it was held that the reimbursable expenses cannot be subject to levy of service tax.