2026-VIL-376-CESTAT-HYD-ST
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SERVICE TAX CESTAT Cases

Service Tax - Taxability of Incentives/Discounts received by dealer from manufacturer - Demand for service tax on incentives/discounts received from the manufacturer under various schemes, alleging that these were consideration for certain activities/services provided by the dealer to the manufacturer - Whether the incentives/discounts received by the dealer from the manufacturer are liable to service tax - HELD - The incentives/discounts received by the dealer from the manufacturer are not liable to service tax. The dealership agreement between the dealer and the manufacturer was on a principal-to-principal basis, where the dealer buys vehicles from the manufacturer for resale to customers. The various terms and conditions in the agreement, including obligations on the dealer for sales promotion, advertisement etc., are conditions of the contract and not separate services for which consideration is paid - The Tribunal relied on various judicial precedents which held that such incentives/discounts are in the nature of trade discounts or reductions in purchase price, and not consideration for any services. The activities performed by the dealer, such as sales promotion, are in its own interest and cannot be regarded as services provided to the manufacturer. Therefore, the incentives/discounts received by the dealer are not liable to service tax - The order of the adjudicating authority which had dropped the demand for service tax is upheld and the Revenue appeal is dismissed
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