2008 (12) TMI 91 - AT - Service Tax

Allegation that assessee, engaged in business of tyre re-treading service, is declaring only 30% of the total charges collected from their customers as taxable value in their ST-3 returns & balance 70% was treated as sale account of tread rubbers used for treading invoices shows material cost and service charges separately - since there was a sale of goods while rendering taxable services, benefit of Not. No. 12/03 providing exemption to cost of materials sold is available to the appellant

Summary

The Appellate Tribunal CESTAT, CHENNAI, consisting of Ms. Jyoti Balasundaram and Shri P. Karthikeyan, heard an appeal from a business providing tyre re-treading services. The business declared only 30% of total charges collected from customers as taxable value in their service tax returns for the period 2005-06, treating the remaining 70% as a sale account for tread rubbers. The department alleged underpayment of service tax and Education Cess, leading to a demand and penalty. The appellants argued that the 70:30 ratio was based on actual material costs, ascertained from MRF invoices, and that the cost of materials was excluded from taxable value under Notification No. 12/03. The Tribunal agreed, citing a Supreme Court decision that allowed for the bifurcation of transactions into sales and service portions for tax purposes. Consequently, the Tribunal set aside the order and allowed the appeal on 16-12-2008. The judgment clarified the legal position on the treatment of goods sold in conjunction with taxable services.