2015 (12) TMI 549 - AT - Service Tax

Demand of service tax - Authorization dealer service - three service provided to the Retail customers - Held that - Contents of the Agreement between the Maruti Udyog Ltd. and respondent only state that for the services rendered by the Servicing Dealers, the Selling Dealer shall pay the bills of the free services. We find that this is an internal arrangement between two dealers and has nothing to do with the payment for the service provided by the Selling Dealer to the customer of the car. The show cause notice has been issued to the Selling Dealer demanding service tax for the services rendered to the Customer. As far as this transaction is concerned, as noted in the judgments above, the value of services is included in the dealers margin and no service charge is received from the service recipient. If at all, in the light of the above, it is the transaction between the two dealers which could have been subject to tax - Decided against Revenue.

Summary

Issues: Leviability of service tax on free services provided by the respondent under warranty period.

In this case, the issue revolves around the leviability of service tax on three free services provided by the respondent, who is an authorized dealer of M/s. Maruti Udyog Ltd. The respondent does not recover service charges from customers, as these charges are included in the dealer's margin provided by the manufacturer. The Tribunal judgments in similar cases have been relied upon by the respondent to support their position. The Revenue, however, argues that the agreement between M/s. Maruti Udyog Ltd. and the respondent clearly indicates a definite value for the services provided, as the Selling Dealer is obligated to pay for free services provided by another dealer. The Tribunal, after considering both sides' submissions, concludes that the agreement between the two dealers regarding payment for services rendered by the Servicing Dealer does not impact the service provided by the Selling Dealer to the customer. The Tribunal emphasizes that the value of services is already included in the dealer's margin, and no separate service charge is received from the customer. Therefore, the transaction between the two dealers could potentially be subject to tax, but not the service provided to the customer. The Tribunal upholds the impugned order and dismisses the appeal of the Revenue, citing that the judgments referred to by the respondent apply squarely to the facts of the present case.