CESTAT: Service Tax Cannot be Levied on Incentive Received for Achieving Sales Target

CESTAT: Service Tax Cannot be Levied on Incentive Received for Achieving Sales Target

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Delhi by its two-member bench of Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) has observed that the amount received for achieving certain sales targets is not taxable under the category of business auxiliary service as the same is in the form of a trade discount received.

In the present case, the appellant/assessee- M/s. Audi Motors Pvt. Ltd. had challenged the order dated 20 July, 2017, passed by the Commissioner confirming the demand for service tax with interest and penalty assailed by M/s Audi Motors.

The sole issue that arose for consideration in the appeal was whether the incentives for achieving the sales target could be considered as commission for providing ‘business auxiliary service’ and, therefore, subjected to levy of service tax.

In this regard, the CESTAT relied on the decision of the CESTAT in the case of M/s DD Motors vs. Commissioner of Central Excise, Uttar Pradesh, wherein it was held, “that the incentive received by the appellant from M/s Maruti Udyog Ltd. for achieving certain sales target for a month or for a season is in the form of a trade discount and same cannot be considered as a service under the category of the business auxiliary service for the levy of Service Tax.”

Applying the same ratio in the present case, the CESTAT observed that the appellants were receiving a certain monetary incentive when they achieved a predetermined sales target. The target incentives, were more in the nature of trade discounts hence, could not be subjected to service tax under the category of business auxiliary services.

Accordingly, the Tribunal set aside the order passed by the Commissioner and allowed the appeal.