2014 (4) TMI 640 - AT - Service Tax

Demand of service tax - Classification of service - business auxiliary service - Exchange of old cars for new cars - Whether this service can be considered as sale - Held that - the property is delivered and the price has been received by the seller of the old car. Therefore, the first transaction cannot be considered as the one which is not a sale. There is no doubt as to the second transaction whether it is a sale or not. once the first transaction is considered as sale it means that the vehicle has been purchased by the appellant subsequently sold by them. Therefore it becomes totally a transaction of purchase and sale of old vehicles - activities are undertaken as value addition by them and it is neither for the seller nor the purchaser. It is an activity undertaken to increase the value of the vehicle so that they get the maximum return out of it. Therefore we cannot say that there is a service element in this transaction either. As regards the invoices produced before us there is no clarity being there as to whether the Commissioner has seen these documents - In any case there is no observation saying that the vehicles were not sold under an invoice by the appellants - appellants have made out a case in their favour completely - Decided in favour of assessee.

Summary

Issues:
1. Whether the activity of exchanging old cars for new cars amounts to provision of business auxiliary service.
2. Whether the difference between the sale price of old cars and the purchase price should be treated as remuneration for providing the service.
3. Whether the non-transfer of registration at the time of transferring possession of the old vehicle by the owner affects the transaction as a sale.
4. Whether the Commissioner's decision on the sale and purchase completion based on ownership transfer is correct.
5. Whether the documents submitted by the appellants reflect the correct position of the sales transactions.
6. Whether the appellant's activities of refurbishing and selling old vehicles constitute a service element.

Analysis:
1. The appellant, an authorized dealer for vehicles, was engaged in selling used vehicles. The Revenue contended that the exchange of old cars for new cars constituted a business auxiliary service, leading to a service tax demand. The Commissioner considered the transaction as service due to non-transfer of registration, but the appellant argued that under the Sale of Goods Act, registration is not essential for property transfer, supported by the Kerala High Court decision. The VAT paid on old vehicle transactions further indicated purchase and sale, not a service.

2. The Revenue argued that ownership transfer, determined by the registration certificate, was crucial for sale completion. The Commissioner found the appellant's activities as service-oriented based on ownership transfer criteria. However, the Tribunal noted that the Commissioner's observations indicated a sale transaction where old car owners handed over vehicles, received payment, and transferred possession, fulfilling sale criteria. The Kerala High Court decision emphasized that sale completion occurs upon price receipt and property delivery, not registration.

3. The Tribunal emphasized that the completion of the first transaction as a sale implied subsequent purchase and sale by the appellant, refuting any service element in refurbishing activities. The lack of clarity on whether the Commissioner reviewed the invoices submitted did not diminish the validity of the sales transactions. Despite being a stay application, the Tribunal decided to allow the appeal, as the case was thoroughly examined, and further litigation would be futile, leading to the appeal's immediate approval.

Conclusion:
The Tribunal ruled in favor of the appellant, emphasizing the sale nature of the transactions based on price receipt and property delivery, not registration transfer. The decision highlighted the absence of a service element in the refurbishing activities and approved the appeal to prevent prolonged litigation.