2009 (1) TMI 172 - AT - Service Tax

The demand is raised on the basis of Circular No.87/05/06-ST dated 06.11.2006 issued by the CBEC. This circular had clarified that where service charges are reimbursed by the vehicle manufacturers, such reimbursement should be subject to service tax. The lower authorities had rejected the claim of the appellants that they were not paid any charges for the free services rendered either by the manufacturer of the vehicles or by the purchaser of the vehicles - the tax was demanded on the margin earned by then on sale of the vehicles as they collected no charges for the first three services held that no service tax can be levied on th wamount representing the dealers margin or any part of it which already has been subjected to sales tax demand set aside.

Summary

The appellate tribunal CESTAT CHENNAI, in the case of M/s. Pillai & Sons Motor Company, found that the demand for service tax on the dealer's margin received by the appellants for free services rendered to buyers of vehicles was not valid. The tribunal referred to a previous decision in ASL Motors Pvt. Ltd. Vs Commissioner of Central Excise & Service Tax, Patna, which established that the dealer's margin recovered by the appellants as part of the sale value of the cars had already been subjected to sales tax by the state government. The tribunal concluded that no service tax could be levied on the amount representing the dealer's margin. Therefore, the impugned order was set aside and the appeal was allowed. The judgement was delivered by Shri P. Karthikeyan, Member (Technical) on 27th January 2009 and certified on 3rd February 2009 in Appeal No. ST/4/2007. Shri Savith V. Gopal appeared for the appellants, and Shri R.P. Meena represented the respondent. The decision was dictated and pronounced in open court. This summary provides a detailed analysis of the judgement, covering all relevant issues comprehensively.