2026-VIL-1649-CESTAT-MUM-ST
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SERVICE TAX CESTAT Cases

Service Tax - Taxability of incentives, discounts and reimbursements received by an authorized vehicle dealer from car manufacturers under Sections 65B(44), 66E(e), 66B and 67 of the Finance Act, 1994 - Appellant, an authorized dealer purchasing and selling vehicles on a principal-to-principal basis, received incentives, bonus and discounts from car manufacturers for achieving sales targets of vehicles and spare parts and for passing on discounts to customers - Whether the appellant is required to pay service tax on such incentives, discounts and reimbursement amounts - HELD - A declared service under Section 66E(e) requires a contractual obligation with a necessary and sufficient nexus between the agreement to do or refrain from an act and the consideration flowing therefor, as clarified by the Board's own instructions - In the absence of any contractual obligation or flow of consideration for a specific act of doing or tolerating an act, receipts related to sale of cars or provision of authorized service, being trade discounts and incentives under manufacturer schemes based on sales targets, cannot be treated as consideration for agreeing to the obligation to do an act - The relationship between the appellant and the manufacturer being on a principal-to-principal basis, incentives and discounts received under manufacturer schemes cannot be regarded as consideration for promotion or marketing of goods merely because so termed, the relevant test being the nature of the transaction, which remains one of sale - The issue of taxability of such discounts and incentives has attained finality in favour of assessees in a consistent line of decisions of the Tribunal. Issue held no longer res integra – The impugned order is set aside and appeal is allowed
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