2009 (5) TMI 810 - Commissioner - Service Tax

Summary

Issues involved: Appeal against demand of service tax on value of paint used during provision of service for repair of vehicles.

Summary:
The appeal was filed by M/s. Cauvery Motors (P) Ltd. against the demand raised by the Assistant Commissioner of Central Excise, S.T. & EOU Division Mangalore for not including the cost of paint used during the provision of service for repair of body work, resulting in short paid service tax. The appellants contended that the value of goods sold is exempt from service tax and that they had already paid sales tax on the paint sold. The original authority, however, confirmed the demand with interest and penalties based on the bifurcation of service value in the invoices.

The appellants raised grounds in their appeal, arguing that they had paid VAT on the cost of materials and service tax on labor charges separately. They also cited legal precedents such as the BSNL case and the Shilpa Colour Labs case to support their exemption claim. They further contended that the Board's circular was not binding if it contradicted the law and objected to the imposition of interest and penalties under the extended period.

After a personal hearing, the Commissioner examined the case records and submissions. The key issue was whether the value of paint used in vehicle body repair services should be included in the assessable value for service tax. The Commissioner noted that the appellants had paid sales tax on the paint cost, and as per legal precedents, double taxation should be avoided. Relying on decisions like BSNL v. UOI and Adlabs v. CCE, the Commissioner ruled in favor of the appellants, setting aside the demand, interest, and penalties.

In conclusion, the appeal was allowed, and the demand for service tax on the value of paint used during the provision of services for vehicle repair was set aside, along with the associated interest and penalties.