2018 (1) TMI 55 - AT - Service Tax

Valuation - includibility - value of parts used for replacement on which VAT is paid is includible in the value of the service of Authorized Service Station - Held that - the parts used for providing repair and maintenance service of the vehicle, the same is clearly sold to the client on which the VAT was paid. Therefore the parts used for providing repair and maintenance service is sale of goods and not part of service, therefore the same is not taxable under the Finance Act, 1994 - service tax on the value of parts used for repair and maintenance of vehicle is clearly not sustainable - appeal allowed.

Summary

Issues involved:
1. Inclusion of the value of parts used for replacement, on which VAT is paid, in the service of "Authorized Service Station".

Analysis:

Issue 1: Inclusion of the value of parts used for replacement in the service of "Authorized Service Station"
The primary issue in this case revolved around whether the value of parts used for replacement, on which VAT is paid, should be included in the service of an "Authorized Service Station". The appellant argued that since the parts replaced during vehicle servicing are sold to the customer with VAT paid, they should not be considered part of the service subject to service tax. The appellant relied on precedents like Wipro GE Medical Systems Pvt. Ltd. and Xerox India Ltd. to support this argument. Additionally, the appellant cited Notification No. 12/2003-S.T., dated 20-6-2003, which exempts the value of goods involved in providing services. The Revenue, represented by the Additional Commissioner, maintained the findings of the impugned order.

Upon reviewing the sample invoice of the authorized service station, the tribunal observed that the parts used for repair and maintenance services of the vehicle were clearly sold to the client with VAT paid. Consequently, the tribunal concluded that these parts constituted a sale of goods and were not part of the service, making them non-taxable under the Finance Act, 1994. Even if the replaced parts were considered part of the overall service, the tribunal noted that since the description, quantity, and value of the parts were separately shown in the invoice, they fell under the exemption provided by Notification No. 12/2003-S.T. Therefore, the tribunal held that no service tax could be levied on the sale of these parts. Ultimately, the tribunal set aside the impugned order and allowed the appeal in favor of the appellant.

This judgment clarifies the treatment of parts used for replacement in the service of an "Authorized Service Station" concerning VAT payments and service tax liabilities. It emphasizes the distinction between the sale of goods and the provision of services, highlighting the importance of clear invoicing and adherence to relevant notifications for tax exemptions.