The Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that service tax is not leviable on discount /incentive received from suppliers of motor vehicle spare parts under the head ‘ Other Operating Revenue’ and set aside the service tax demand. The Appellants M/s Premier Car Sales Ltd are engaged in trading of Motor Vehicles of Hyundai, and Honda two-wheelers and Piaggio three-wheelers. They have been registered under Service Tax for providing services of Servicing of Motor Vehicle’, `Business Auxiliary Services’ and `Renting of Immovable Property Services’.

During scrutiny of records of the Appellants, it was observed that they had availed Cenvat credit in respect of service tax paid on various input services like telephone service, courier service, business promotion, cleaning and housekeeping, insurance, maintenance or repairs, advertisement etc. The Appellants have vehemently submitted that on the basis of Statement of Demand issued under section 73(1)(A) , demand of service tax could not have been raised on miscellaneous income. As per the said section, the Statement of Demand can be issued for a subsequent period, on the basis of SCN for an earlier period only if the grounds relied upon for the subsequent period are the same as are mentioned in the earlier notice.

Concerning the alleged difference in value of other operating revenue, the appellants had submitted that the entire difference of Rs25.7 crores represents the discount received from suppliers on the purchase of motor vehicles, spare parts etc.

They have also produced sample copies of schemes, to prove that the manufacturers of vehicles used to provide discount on sale of vehicles, spare parts etc. The appellants have also submitted a certificate from a Chartered Accountant certifying that the amounts received and accounted for under the head other operating revenue in the P/L account pertains to the amount received towards various discounts , schemes given by the supplier of car, spare parts etc. It has further been certified that the aforesaid amount does not pertain to any service A two-member bench of Mr P K Choudhary, Member (Judicial) and Mr Sanjiv Srivastava, Member (Technical) held that the Appellants were not liable for payment of service tax on discount /incentive received from suppliers of motor vehicle, spare parts etc and accounted for under the head other operating revenue. The CESTAT set aside both the impugned orders and allowed the appeals with consequential relief.