2026-VIL-1872-CESTAT-AHM-ST
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SERVICE TAX CESTAT Cases

Service Tax - Taxability of target based and non-target based incentives received by car dealer from manufacturer - Declared service under Section 66E(e) of Finance Act, 1994 - Appellant, an authorised dealer of a car manufacturer, received target based and non-target based incentives, claims and bonus from the manufacturer, including incentive on spares and oil. The Department alleged that these were consideration for sales related services covered as a declared service, and the Adjudicating Authority confirmed the demand with interest and penalty, which the FAA upheld - Whether incentives and claims received by a dealer from the manufacturer are liable to service tax as consideration for a declared service - HELD - The issue of leviability of service tax on target based and non-target based incentives is no more res integra, as it has been decided in a series of cases. The Tribunal has held that trade discounts, quantity discounts, target linked incentives and sales claim reimbursements received by an authorised dealer, who purchases and sells goods on principal to principal basis, are not liable to service tax. Such incentives are known only post facto and amount to reduction of the purchase price, so they cannot be treated as consideration for any service - The demand is not sustainable, the impugned order is set aside and the appeal is allowed - Penalty on General Manager of dealer company under Section 78A of Finance Act, 1994 - The General Manager of the Appellant company was penalised under Section 78A for non-payment of service tax on incentives received by the company. He contended that he was an employee who discharged his responsibilities and did nothing in his personal capacity - Whether penalty under Section 78A can be sustained on the General Manager when the service tax demand against the company does not survive - HELD - When the main appellant itself is not liable to pay any service tax, the employee cannot be faulted with any violation or contravention of the provisions of the Finance Act, 1994. The Tribunal had earlier taken the same view where penalty on the Accounts Manager of a dealer company was held unsustainable once the demand against the company failed - The penalty is set aside and the appeal is allowed.
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