2009 (3) TMI 57 - AAR - Service Tax

Management, maintenance or repair - Rubberizing charges collected for reconditioning of used old rollers - rubberisation activity undertaken on behalf of particular customer - sale invoice will be raised for full value of material used in rerubberising process and sales tax will be collected held that tax is payable on the re-rubberising charges collected - claim for exclusion of the value of material sold can be sustained subject to the fulfillment of the conditions of Not. 12/03

Issues Involved:
1. Service tax liability on re-rubberizing charges for reconditioning used old rollers.
2. Taxability of the sale of materials used for reconditioning under the head of 'repairs.'
3. Inclusion of the value of materials sold in the taxable value of services under repairs and maintenance.

Issue-wise Detailed Analysis:

1. Service Tax Liability on Re-rubberizing Charges:
The applicant sought clarification on whether service tax is payable under section 66 read with section 65(64)(c) on the re-rubberizing charges collected for reconditioning used old rollers. The Authority concluded that the re-rubberization of used rollers amounts to repair or reconditioning of goods under section 65(64)(c). Therefore, service tax is indeed payable on the re-rubberizing charges collected. The ruling emphasized that this liability arises when the applicant undertakes reconditioning pursuant to an order or agreement with a customer, indicating a provision of service in the nature of repairing or reconditioning.

2. Taxability of Sale of Materials Used for Reconditioning:
The applicant questioned whether the sale of materials used in reconditioning old rollers attracts service tax under the head of 'repairs.' The Authority noted that the applicant's invoices and submissions were inconsistent and unclear. Despite the applicant's claim that VAT (Sales tax) would be charged on the full value of the invoice, the sample invoice provided did not separately indicate the value of materials used. The Authority inferred that the applicant is charging for the service of re-rubberizing the used rollers, making it essentially a service transaction. Therefore, the sale of materials used in the process does not attract separate service tax under the head of 'repairs.'

3. Inclusion of Value of Materials Sold in Taxable Value:
The applicant sought clarification on whether the value of materials sold should be included in the taxable value of services under repairs and maintenance. The Authority referred to Notification No. 12/2003-Service Tax, which exempts the value of goods and materials sold from service tax, provided there is documentary proof indicating the value of such goods and materials. The Authority emphasized that to claim this exemption, the applicant must produce documentary evidence and establish that no Cenvat Credit of duty has been availed. However, the sample invoice provided by the applicant did not specify the materials or their value, only reflecting the re-rubberizing charges. Consequently, the Authority concluded that the exemption could not be extended to the applicant based on the presented facts.

Conclusion:
1. Service Tax on Re-rubberizing Charges: Yes, service tax is payable on the re-rubberizing charges collected.
2. Taxability of Sale of Materials: The sale of materials used in reconditioning does not attract separate service tax under 'repairs.'
3. Inclusion of Value of Materials Sold: The claim for exclusion of the value of materials 'sold' can be sustained subject to fulfilling the conditions of Notification No. 12/2003-S.T.

Final Ruling:
The Authority ruled that service tax is payable on the re-rubberizing charges collected. The value of materials sold can be excluded from the taxable value of services if the conditions of Notification No. 12/2003-S.T. are met. The ruling was issued on March 31, 2009.

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