TMI Blog2023 (10) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant : Shri Bipin Garg and Ms. Kainaat, Advocates Present for the Respondent: Shri Harsh Vardhan, Authorised Representative ORDER The order dated 05.01.2015 passed by the Commissioner confirming the demand raised in the show cause notice dated 21.04.2014 has been assailed in this appeal. 2. The appellant claims to be an authorized dealer of Tractors and Farms Equipment Ltd. [the company] It also claims that it sells the product of the company on a principal to principal basis and on the basis of such sales, the company has been providing incentives and discount to the appellant. 3. An audit was conducted on November 13 and 14, 2013 for the period commencing April, 2008 upto September 2013. The audit team noted that the appellant had received sales commission amounting to Rs. 5,03,25,491/- from the company through credit notes issued in respect of sale of tractors during the period October, 2008 to September, 2013. Though the appellant explained that the amount received from the company was towards the sales incentives and not sales commission, but this explanation offered by the appellant did not find favour of the department and a show cause notice dated 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant and the learned authorized representative appearing for the department have been considered. 10. In order to appreciate the contentions it would be useful to first reproduce the relevant clauses of the agreement because it is the terms of the agreement that are the bone of contention between the parties. 11. The agreement was entered into on March 06, 2012 and it specifically provides that it is between the company and the appellant, which has been described as a dealer. It provides that whereas the company was engaged in the business of design, manufacture and sale of agricultural machineries and spare parts, including tractors and farm equipments, the dealer had approached the company with a request to provide dealership, for which the company had agreed on the terms and conditions set out in the agreement. 12. Clause 1 of the agreement deals with grant of non-exclusive rights and it is reproduced below; 1. GRANT OF NON-EXCLUSIVE RIGHTS: The Company grants to the Dealer a non-exclusive right during the continuance of this agreement to purchase for re-sale, within the territory described in Schedule-I hereto (hereinafter called the territory ) such of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure date shall be borne by the Dealer. 14. Clause 5 of the agreement deals with payment and it is reproduced below: 5. PAYMENT Unless otherwise agreed upon in writing at the time of acceptance of any order for the supply of the products by the Company, payment shall be made in advance by Demand Draft or Banker's Pay Orders on Company's bankers including exchange, collection charges and interest from date of presentation or by such other mode as may be instructed by the Company, from time to time. The Dealer shall also maintain in the Company's favour an irrevocable confirmed Revolving Letter of Credit or Bank Guarantee for such amount as may be required by the Company from time to time, considering the volume of turnover. The Company expressly retains the right, in the event of the Dealer failing to make payment in the agreed manner, invoke the Bank Guarantee and also divert the products to another destination and in such an event the Dealer shall pay the demurrage, freight, storage and all other expenses incurred as a result of such failure of the Dealer to pay. This right of Company is in addition to any rights the Company would otherwise have and not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) CHANGE IN OWNERSHIP OR MANAGEMENT: (k) CONDITIONS OR PURCHASE AND RESALE: (l) ADVERTISING: (m) RECRUIT ITS OWN PERSONNEL: (n) BE RESPONSIBLE FOR THIRD PARTY CLAIMS: (o) MAINTAIN DEMONSTRATION TRACTORS: (p) TAKE ADEQUATE INSURANCE: (q) ASSIST THE COMPANY IN CONSUMER DISPUTES: (r) ABIDE BY RULES, ETC: (s) NOT TO DEAL IN SIMILAR AND COMPETITOR S PRODUCTS: 16. Clause 17 of the agreement deals with duties of company and clause 26 deals with legal relationship and they are reproduced below: 17. DUTIES OF COMPANY: The Company hereby agrees with the Dealer that it will during the continuance of this Agreement: (a) SUPPLY CATALOGUE ETC.: Supply the Dealer with promotional materials as it considers reasonably sufficient with a view to promoting sales of the products and of instruction books, technical pamphlets, catalogues as it considers necessary with a view to providing and promoting such after-sales-service as it considers appropriate. The Company shall also supply additional material, if so required to the Dealer at their cost. (b) INSTRUCTION COURSES FOR DEALER S EMPLOYEES: Provide such courses of instructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar circumstances, the Tribunal held that the amount of incentives received cannot be treated as a consideration for any service for the reason that the agreement itself provides that the appellant has to undertake certain sales promotion activities as well. The Tribunal, in fact, referred to the earlier decision of the Tribunal in Rohan Motors vs. CCE, Meerut-I [2018 (7) TMI 29 (CESTAT-NEW DELHI)], wherein the Tribunal held as follows: As per the agreement with MUL, the appellant has received various incentives/ discounts / bonus etc. from MUL from time to time. The income received under these heads was accounted by the appellant in their books of accounts as miscellaneous income‟. During the course of audit of the books of accounts of the appellant, the Department noticed such Misc. income and took the view that such amounts received by the appellant from MUL are consideration towards promotion and marketing of the vehicles manufactured by MUL and such consideration is liable for payment of Service Tax under the category of Business Auxiliary Service. By taking the above view, show cause notice dated 17.10.2011 was issued covering the period 01.04.2006 to 31.03.2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacing reliance upon the decision of the Tribunal in Sai Service Station Ltd., observed as follows: I also find that the ratio of the aforesaid case of CCE, Mumbai-I Vs. Sai Service Station is squarely applicable to the facts of the present case and hold that no service tax can be demanded on the incentive which was in form of trade discounts, extended to the party in terms of a declared policy for achieving sales target. Accordingly, I find that the demand of service tax raised on this count is unsustainable. Thus demand of interest under section 75 of the Act is also no sustainable. 15. The Department, in the present cannot be permitted to take a different view. The service tax on the amount received form incentives could not, therefore, have been levied to service tax. 22. Thus, for both the pre-negative period and the post negative period the issue stands decided in favour of the appellant by the two decisions of the Tribunal in Rohan Motors. 23. In any view of the matter, the appellant cannot be termed as an agent of the company. The Commissioner was, therefore, not justified in holding that the appellant had received commission which would be subject to the lev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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