Order Date – 05 February 2024

Parties: M/s. Jubilant Motor Works (South) Pvt. Ltd. Vs The Commissioner of GST & Central Excise

Facts –

• The Appellant, M/s. Jubilant Motor Works (South) Pvt. Ltd., is a private limited Company engaged in the sale of AUDI brand cars, purchased from Volkswagen on principal-to-principal basis for sale to various customers. The Appellant took over all business activities with respect to Chennai operations of M/s Jubilant Motor Works Pvt. Ltd. ("JMWPL") with effect from 21.12.2015.
• Show Cause Notice dated 18.10.2016 was issued to the Appellant alleging demand of service tax on various incentive income, advance forfeiture income received from the customers, and reversal of input tax credit for the period April 2011 to March 2016.

Issue –

• Whether the demand for service tax and reversal of input tax credit is proper?

Order –

• The Tribunal observed that the incentives are purely on the basis of sales and not for providing service of promoting the business of M/s. Volkswagen / Castrol India. The demand made after 01/07/2012 also is not sustainable. Hence, it was held that the demand of service tax raised on incentives / discounts from M/s. Volkswagen and M/s. Castrol cannot sustain and requires to be set aside.
• With regards to the issue of advance forfeited at the time of cancellation of booking of car, in the case of Lemon Tree Hotel Vs. Commissioner, GST CE & Customs, Indore 2020 (34) GSTL 220 (Tri-Delhi), it was held that such amount is not liable to levy of service tax under Section 66 E (C) of Finance Act 1994 or under Section 65 (105) (zzz-w) of Finance Act 1994. Thus, the issue is answered in favour of the appellant and against the department.
• The issue as to whether the assessee is required to follow only Rule 6 (3) (i) on failure to intimate the department as to the option to reverse proportionate credit is no longer res-integra. It has been held in various decisions that the requirement for giving an intimation is only procedural in nature and the department cannot deny to an assessee the option available under Rule 6 (3) (ii) only because they did not comply with the procedure of prior intimation.
• Hence it was held that the demand raised alleging that appellant has to pay 5% / 6% / 7% of the value of exempted services even though they have reversed proportionate credit cannot sustain. The appellant company has come into existence only in 2015 and therefore cannot be called upon to pay service tax prior to 2015. Hence the confirmation of demand of service tax, interest and penalties cannot be sustained. In the result, the impugned order is set aside. The appeal is allowed.