T.V.Sundram Iyengar And Sons PVT LTD vs. The Commissioner Of CGST And Central Excise

Held

The Court held that the writ petition was maintainable. It found that the adjudicating authority had failed to read the dealership agreements as a whole, giving undue emphasis to individual clauses. The Court concluded that the finding of the authority that the relationship was not on a principal-to-principal basis was unreasonable. The Court adopted the reasoning from an Advance Ruling (AAR/ST/11/2016) that volume discounts, if gratuitous and not claimable as a matter of right, do not constitute declared services under Section 66E(e). The Court also noted that the adjudicating authority had disregarded binding CESTAT decisions (Prabhakar Marotrao Thaokar & Sons and Hindustan Petroleum Corporation Ltd.) on the ground of pending appeals before the Supreme Court, despite no interim orders being granted. This defiance of binding precedent rendered the impugned order invalid and without jurisdiction. Consequently, the Court quashed the impugned order. The Court did not expressly leave any issue undecided.

Facts

The petitioner, M/s. T.V. Sundram Iyengar & Sons Pvt. Ltd., a dealer in motor vehicle parts and chassis, challenged an order dated December 17, 2020, passed by the Commissioner of CGST & Central Excise, Madurai. The respondent had proposed to levy service tax, interest, and penalty on trade discounts received by the petitioner from manufacturers, treating them as consideration for services. The petitioner contended that their relationship with manufacturers was on a principal-to-principal basis, involving the purchase and resale of goods. Previously, the petitioner had filed a writ petition (W.P.(MD)No.16037 of 2019) seeking a copy of an investigation report, which was allowed by the Court. Following the provision of the report and a personal hearing, the impugned order was passed.

Key Issues

1. Whether the writ petition is maintainable before this Court, bypassing the alternative remedy of appeal, given the alleged perversity, unreasonableness, or unfairness in the adjudicating authority's action, as per the parameters set by the Madras High Court in Mahindra & Mahindra Ltd. v. The Joint Commissioner (CT) Appeals, Chennai? 2. Whether the trade discounts received by the petitioner from manufacturers constitute a taxable service under Section 66B of the Finance Act, 1994, or if the petitioner's activity falls under the negative list of services as "trading of goods" under Section 66D(e), or if it constitutes a "declared service" under Section 66E(e) of the Finance Act, 1994? Petitioner's arguments: The petitioner argued that the relationship with manufacturers was principal-to-principal, involving only the sale of goods, and that incidental clauses regarding business performance in dealership agreements were irrelevant. They contended that the adjudicating authority had summarily brushed aside case laws and binding tribunal decisions. They relied on the Mahindra & Mahindra judgment for interference under Article 226 and decisions from CESTAT, such as Prabhakar Marotrao Thaokar & Sons and Hindustan Petroleum Corporation Ltd., to support their principal-to-principal transaction argument. Respondent's arguments: The respondent contended that the writ petition was not maintainable due to the availability of an alternative remedy of appeal. They also argued that the adjudicating authority made adverse factual findings that the High Court should not re-examine and that the petitioner's claim of a principal-to-principal relationship was incorrect, asserting the activity fell under Section 66E(e) of the Finance Act.