2017 (1) TMI 1110 - SC - Service Tax

Valuation - works contract - whether in a contract for retreading of tyres, service tax is leviable on the total amount charged for retreading including the value of the materials/goods that have been used and sold in the execution of the contract? Held that - Section 67 of the aforesaid Act deals with valuation of taxable services and specifically mentions that the same does not include the cost of parts or other material, if any, sold to the customer during the course of providing maintenance or repair service. On the very face of the language used in Section 67 of the Finance Act, 1994 we cannot subscribe to the view held by the Majority in the appellate Tribunal that in a contract of the kind under consideration there is no sale or deemed sale of the parts or other materials used in the execution of the contract of repairs and maintenance. The finding of the appellate Tribunal that it is the entire of the gross value of the service rendered that is liable to service tax, in our considered view, does not lay down the correct proposition of law which, according to us, is that an assessee is liable to pay tax only on the service component which under the State Act has been quantified at 30%. Acceptance of 70% of the amount as cost of material - Held that - It is now stated before us that the aforesaid figures have been furnished by the assessee himself and, therefore, must be understood not to be authentic. This, indeed, is strange. No dispute has been raised with regard to the correctness of the said figures furnished by the assessee in the show cause notice issued to justify the stand now taken before this Court; at no point of time such a plea had been advanced. - Revenue cannot challenge an issue first time here. Appeal allowed - decided in favor of appellant-assessee.

Summary

Issues involved:
1. Whether service tax is leviable on the total amount charged for retreading of tyres, including the value of materials used?
2. Interpretation of the definition of 'taxable service' under Section 65(105)(zzg) of the Finance Act, 1994.
3. Application of Section 66 and Section 67 of the Finance Act, 1994 in the context of service tax on maintenance or repair services.
4. Analysis of government notification No.12/2003-ST dated 20th June, 2003, and CBEC circular dated 7th April, 2004.
5. Assessment of liability for service tax on the gross value of services rendered, including the cost of materials used and transferred.

Detailed Analysis:

Issue 1:
The main issue in this appeal was whether service tax is applicable on the total amount charged for retreading of tyres, including the value of materials used. The judgment analyzed the provisions of the Finance Act, 1994, specifically focusing on the definition of 'taxable service' under Section 65(105)(zzg) and the related Sections 66 and 67.

Issue 2:
The judgment delved into the interpretation of the definition of 'taxable service' under Section 65(105)(zzg) of the Finance Act, 1994, which pertains to services provided in relation to maintenance or repair. The court examined the scope of 'maintenance or repair' as defined in Section 65(64) to determine the applicability of service tax in the context of retreading services.

Issue 3:
Sections 66 and 67 of the Finance Act, 1994 were crucial in determining the valuation of taxable services for levying service tax. The court highlighted the exclusion of the cost of parts or materials sold to the customer during maintenance or repair services, as specified in Section 67, which was pivotal in deciding the tax liability in the present case.

Issue 4:
The judgment also referenced government notification No.12/2003-ST dated 20th June, 2003, and a CBEC circular dated 7th April, 2004, which provided exemptions and guidelines regarding the valuation of taxable services and the sale of goods and materials by service providers to recipients. These notifications played a significant role in the court's analysis of the case.

Issue 5:
The assessment of liability for service tax on the gross value of services rendered, including the cost of materials used and transferred, was a key aspect of the judgment. The court scrutinized the evidence and arguments presented by both parties, ultimately setting aside the appellate tribunal's majority order and ruling in favor of the appellant-assessee based on the provisions of the Finance Act, 1994, and related notifications.

This comprehensive analysis of the judgment provides a detailed understanding of the legal issues involved and the court's interpretation of the relevant provisions in deciding the appeal related to the levy of service tax on retreading services.