2018 (11) TMI 1763 - AT - Service Tax

Levy of Service tax - Business Auxiliary Services - incentive for achieving the sales target - inclusion of value of the parts and spares supplied/used in the course of undertaking servicing of the vehicles in the taxable value under the category of Authorized Service Station . Whether the incentive for achieving the sales target can be considered as the commission for providing a business auxiliary service and can be subjected to service tax? - HELD THAT - The incentive received by the appellant from M/s Maruti Udyog Ltd. for achieving certain sales target for a month or for a season is in the form of a trade discount and same cannot be considered as a service under the category of the business auxiliary service for the levy of service tax - thus, the amount is not taxable under the category of the business auxiliary service as same being in the form of a trade discount received by the appellant from the supplier of vehicles. Whether the value of the parts and spares supplied/used in the course of undertaking servicing of the vehicles need to be included in the taxable value under the category of Authorized Service Station ? - HELD THAT - In principle the value of the spare parts and components used during the course of undertaking of servicing of vehicles is not includable in the taxable value for charging service tax. However, the fact whether the parts, spares and other components supplied by the appellant while undertaking the servicing of the vehicles has actually been subjected to payment of VAT or sales tax needs verification at the field level. Therefore, with regard to the demand of the service tax on the second issue, we hold that in principle, the value of spares, parts, components used while providing the servicing of the vehicles is not includable in the taxable value in the levy of the service tax, subject to that, no Cenvat credit has been availed all such parts, spares, components and the prevailing VAT/sales tax has been charged/paid from the recipient of the service - This fact needs verification at the field level and, therefore, we remand back the matter for denovo adjudication only with regard to the verification of this fact. Appeal allowed in part - part matter on remand.

Summary

Issues:
1. Whether the incentive received for achieving sales targets is taxable under business auxiliary services for service tax levy.
2. Whether the value of spare parts and components used during vehicle servicing should be included in the taxable value.

Analysis:

Issue 1:
The appellant, a service station for vehicle servicing, received incentives from M/s Maruti Udyog Ltd. for achieving sales targets. The department contended that these incentives should be taxable under business auxiliary services. The appellant argued that the incentives were trade discounts, not for providing services to the manufacturer. The Tribunal referred to past decisions, including the appellant's case, where it was held that such incentives are trade discounts and not taxable under business auxiliary services. The Tribunal ruled that the incentives received were in the form of trade discounts and not subject to service tax under business auxiliary services.

Issue 2:
Regarding the inclusion of spare parts' value in taxable value, the appellant cited CBEC Circular and Tribunal decisions stating that service tax is not leviable on spare parts sold during vehicle servicing, subject to VAT/sales tax payment by the recipient. The Tribunal referred to relevant decisions, including Tanya Automobiles (P) Ltd. and Seva Automotive Pvt. Ltd., where it was held that the cost of spare parts sold during service cannot be part of the transaction value. The Tribunal ruled that the value of spare parts used during vehicle servicing should not be included in the taxable value for service tax levy, provided no Cenvat credit is availed, and VAT/sales tax is charged/paid by the recipient. The matter was remanded for verification at the field level for denovo adjudication.

In conclusion, the Tribunal allowed the appeal on the first issue, holding the incentives received were not taxable under business auxiliary services. On the second issue, the matter was remanded for further verification regarding the value of spare parts used during vehicle servicing for denovo adjudication.