2016 (2) TMI 773 - AT - Service Tax

Demand of service tax on various activities i.e. (i) handling charges for loading and un-loading of the vehicle (ii) sales of extended warranty (iii) registration charges received for getting the vehicle sold, registered with the Regional Transport Authority - Held that - the service tax is not exigible on handling charges, registration services and sale of spares and lubricant, which have been separately reflected in the invoices and have suffered VAT/Sales tax. We further hold-that the handling charges are in the nature of trading receipt and is not taxable. In respect of the registration charges, they have discharged their statutory obligation, as such, it is not taxable. In so far as the service tax on sale of extended warranty is concerned, although we find that the service tax may be exigible on the net discount/commission earned, but in absence of proper classification, both in the show-cause notice and the impugned order, we set aside the demand on this count. - Demand set aside - Decided in favor of assessee.

Summary

Issues:
1. Appellant challenging Order-in-Original regarding service tax on handling charges, extended warranty, registration charges, spare parts, and lubricants.
2. Classification of services under Business Auxiliary Services (BAS) or Business Supporting Services (BSS).
3. Taxability of handling charges, sale of extended warranty, registration charges, and sale of spare parts and lubricants.
4. Proper classification and imposition of service tax.

Detailed Analysis:

1. The Appellant, M/s Anand Motor Agency, contested a show-cause notice proposing service tax under various headings for services like handling charges, sale of extended warranty, registration charges, and spare parts and lubricants. The Appellant argued that handling charges are part of trading receipts and not taxable. They also contended that the sale of extended warranty should only be taxed on the net discount/commission earned. The Appellant further claimed that registration charges were for statutory compliance and not classifiable under any service head. Additionally, they argued that service tax on spare parts and lubricants was not applicable as they were separately invoiced and already subjected to sales tax.

2. The issue of handling charges was deemed non-taxable as they were considered trading receipts and not subject to service tax. The Appellant's compliance with statutory obligations for registration charges led to the conclusion that they were not classifiable under any service head. The sale of spare parts and lubricants, separately invoiced and already taxed under sales tax, was also held to be not exigible to service tax. Proper classification and imposition of service tax were crucial, leading to the setting aside of the demand on the sale of extended warranty due to the absence of proper classification in the show-cause notice and the impugned order.

3. The Tribunal's decision was based on the separate reflection of handling charges, registration services, and sale of spare parts and lubricants in the invoices, all of which had already suffered VAT/Sales tax. Handling charges were determined to be trading receipts and not taxable, while registration charges were considered part of statutory compliance and thus not taxable. The sale of spare parts and lubricants, having already been taxed under sales tax, was also found not to be exigible to service tax. The demand on the sale of extended warranty was set aside due to the absence of proper classification, allowing the appeal and granting the Appellant consequential benefits in accordance with the law.

This detailed analysis of the judgment highlights the key issues, arguments presented, and the Tribunal's decision regarding the service tax implications on various services provided by the Appellant.