2013 (9) TMI 553 - AT - Service Tax

Authorized Service Station - Business Auxiliary Service - Duty to be charged on what portion - Appellant were engaged in the business of providing services of Authorized Service Station for Maruti brand vehicles - The department was of the view that the appellant was liable to discharge Service Tax liability on the whole of the amount charged and not on the services portion alone - Whether spare parts sold by a service station during the servicing of vehicles is liable to payment of service tax Held that - The matter was remanded back to the adjudicating authority for consideration afresh of the contention of the appellant that the cost of spare parts sold cannot be included in the value of the services rendered - The appellant was also directed to submit all documents and evidences in support of their claim that they have discharged Sales Tax/VAT on the spare parts sold during the course of rendering the service. The cost of spare parts sold during the rendering of service cannot form part of the transaction value - The Board s Circular dated 23.08.2007 also confirmed the above position - Appellant contended that the transactions which involved only sale of spare parts without rendering of the service - In those cases, the levy of Service Tax would not arise at all - In the bills raised, the appellant had clearly indicated the quantity and value of the goods sold and the Sales Tax/VAT liability discharged - They had also indicated the charges collected for the services rendered and the Service Tax liability - the appeal was allowed by way of remand.

Summary

Issues:
- Whether the appellant is liable to discharge Service Tax on the entire amount charged, including goods sold?
- Whether the cost of spare parts sold during the rendering of service can be included in the value of the services rendered?

Analysis:
1. Issue 1 - Liability for Service Tax on Entire Amount:
The appellant, engaged in providing services of an Authorized Service Station for vehicles, also sells spare parts on which they discharge Sales Tax/VAT liability. The department contended that the appellant should pay Service Tax on the entire amount charged, not just on the services portion. A show cause notice was issued demanding a substantial amount of Service Tax, interest, and penalty. The appellant argued against this, stating they are not liable to pay Service Tax on goods sold, and the inclusion of goods in the taxable service value is legally unsustainable. The department's decision was to confirm the demand, including interest and penalty. The appellant challenged this decision.

2. Issue 2 - Inclusion of Spare Parts Cost in Service Value:
The appellant's counsel argued that Service Tax should only apply to the consideration received for services rendered, not on goods sold during service provision. They pointed out that the appellant clearly indicated the details of goods sold, Sales Tax/VAT liability discharged, service charges, and Service Tax liability separately in the bills issued. The counsel referenced previous Tribunal decisions in similar cases where the matter was remanded back for fresh consideration due to the failure to exclude the cost of goods sold. They also relied on a Board's Master Circular stating that Service Tax is not leviable on transactions treated as sale of goods and subjected to Sales Tax/VAT. The counsel requested a stay and remand for fresh consideration.

3. Judgment:
After hearing both sides, the Tribunal found that the issue was identical to previous cases where it was held that the cost of spare parts sold during service provision should not be part of the transaction value. Referring to the Board's Circular, the Tribunal remanded the matter back to the adjudicating authority for a fresh consideration of the appellant's contention. The appellant was instructed to provide all relevant documents and evidence supporting their claim of discharging Sales Tax/VAT on spare parts sold during service provision. The appeal was allowed by way of remand, and the stay application was disposed of.