2015 (2) TMI 972 - AT - Service Tax

Valuation - inclusion of value of material - authorised service station for Maruti cars - Board s Circular no. 96/7/2007-ST dated 23/08/2007 - Held that - Appellant are charging handling charges whenever automobile parts are sold either independently or part of the service and repair of automobiles. In both the situations, invoices are issued for the sale of the goods as well as for collection of service charges for the services rendered. Handling charges were incurred in connection with the procurement of the goods and are included in the value of the goods sold and sales tax/VAT liability is discharged on the value inclusive of the handling charges. Therefore, we do not understand how service tax levy would apply especially when the goods are subject to sales tax/VAT on a value inclusive of handling charges. It is not in dispute that the handling charges are incurred in connection with the procurement of the parts. If that be so they will obviously form part of the value of the goods when they are subsequently sold. - Section 67 of the Finance Act, 1994 mandate levy of Service Tax on a value or consideration received for rendering the services. Therefore, any consideration received for supply of goods is not covered within the scope of section 67. The decisions of the Tribunal in the case of Ketan Motors Ltd. 2014 (3) TMI 226 - CESTAT MUMBAI and Dynamic Motors cited 2011 (11) TMI 308 - CESTAT, NEW DELHI also support this view. - Accordingly, the impugned order is clearly unsustainable in law and, therefore, the same is set aside - Decided in favour of assessee.

Summary

Issues:
Service tax demand on handling charges collected by the appellant.

Analysis:
The appeal pertains to a service tax demand confirmed by the Commissioner of Central Excise & Customs on the appellant, an authorized dealer of Maruti Udyog Ltd. The appellant, registered as an authorized service station for Maruti cars, had been discharging service tax liability on servicing/repairing vehicles. The dispute arose regarding handling charges collected by the appellant in connection with the sale of automobile parts. The appellant contended that handling charges were part of the value of goods sold, on which sales tax/VAT liability had been discharged. They argued that the handling charges were related to procurement and not service activities, thus not liable to service tax. The appellant relied on relevant circulars and tribunal decisions supporting their stance.

The Revenue, represented by the Dy. Commissioner (AR), maintained that since handling charges constituted a service rendered, service tax was applicable. The Tribunal analyzed the situation and observed that the appellant charged handling charges for both independent sales of parts and as part of service and repair activities. Invoices were issued separately for goods sold and service charges rendered. The handling charges were incurred during procurement and included in the value of goods sold, on which sales tax/VAT was paid. The Tribunal noted that Section 67 of the Finance Act, 1994 mandated service tax on consideration received for services, not for the supply of goods. Citing precedents like Ketan Motors Ltd. and Dynamic Motors, the Tribunal concluded that the impugned order was legally unsustainable. Therefore, the Tribunal set aside the order with consequential relief as per the law.

In summary, the Tribunal ruled in favor of the appellant, holding that handling charges collected by them were not liable to service tax as they were part of the value of goods sold, on which sales tax/VAT had already been paid. The Tribunal's decision was based on the interpretation of relevant legal provisions and established precedents, emphasizing the distinction between consideration for services and consideration for the supply of goods.