2014 (1) TMI 618 - AT - Service Tax

Stay granted - Maintenance and Repair Services - Held that - applicant has not shown the value of material consumed in the retreading process in the invoices separately and therefore they are liable to pay duty on gross amount and not entitled to benefit of exemption under Notification No.12/03. Hence, applicant failed to make out a case for waiver of entire amount of tax along with interest and penalty. Therefore, we direct the applicant to deposit within 6 weeks. Upon such deposit, predeposit of balance tax along with interest and penalty would be waived and recovery thereof stayed during pendency of appeal - Prima facie case not in favour of assessee - Stay granted partly.

Summary

Issues:
1. Applicability of service tax on retreading services without showing cost of materials separately in invoices.
2. Interpretation of Valuation Rules and Notification No.12/03-ST.
3. Liability to pay duty on gross amount in absence of separate material value in invoices.
4. Waiver of tax, interest, and penalty based on compliance with deposit directive.

Analysis:
1. The judgment deals with the issue of service tax liability on retreading services provided without separately showing the cost of materials in the invoices. The applicants, engaged in retreading used tires, paid service tax on 70% of the gross amount without disclosing material costs. The tax authority demanded tax on the gross invoice value, leading to a dispute regarding the tax liability.

2. The advocate for the applicants argued that the show cause notice was issued under Rule 5(1) of the Valuation Rules, which was challenged and struck down by the Delhi High Court in a previous case. On the other hand, the Revenue contended that the Notification No.12/03-ST applied when the material value was shown separately in the invoices, citing a Tribunal decision in a similar case.

3. The Tribunal observed that the applicants failed to demonstrate the value of materials consumed in the retreading process separately in the invoices. Consequently, the Tribunal held that the applicants were liable to pay duty on the gross amount and were not eligible for the exemption under Notification No.12/03. As a result, the Tribunal directed the applicants to deposit a specific sum within a specified period, with the waiver of the balance tax, interest, and penalty subject to compliance with the directive.

4. In conclusion, the judgment clarifies the tax liability for retreading services and emphasizes the importance of disclosing material costs in invoices to determine the duty payable. The decision underscores the significance of compliance with tax regulations and provides a mechanism for waiver of tax liabilities based on specific deposit requirements. Compliance with the Tribunal's directive is essential to avail of the benefits of tax waiver and stay on recovery during the appeal process.