2018 (2) TMI 226 - AT - Service Tax

Liability of service tax - total value of extended warranty coupon, sold by the appellant to the car owners - Revenue considered this as a part of their taxable activity under the heading Authorized Service Station of Motor Cars - Held that - the appellant is not providing service of authorized station to Maruti, as a customer. Services by authorized service station is always to a customer who brings in his vehicle for any service or repair in any manner. It is apparent that it is not Maruti who is bringing in any vehicle any service or repair as a customer, so that the activity can be brought under Section 65(105) (zo). The services, if any, rendered by the appellant to Maruti as a client in the present arrangement cannot be covered in the above mentioned tax entry - appeal allowed - decided in favor of appellant.

Summary

Issues: Tax liability of appellant on extended warranty coupons sold.

Analysis:
1. The appeal challenged an order by the Commissioner (Appeals) regarding the tax liability of the appellant, an Authorized Service Station for a vehicle manufacturer, on the sale of extended warranty coupons to vehicle owners. The dispute centered around whether the consideration received for the extended warranty coupons should be taxed as part of the appellant's taxable activity under the category of "Authorized Service Station" of Motor Cars.

2. The appellant argued that the tax entry for "Authorized Service Station" under Section 65(105)(zo) pertains to services provided to customers in relation to service or repair of motor cars. However, they contended that in the case of selling extended warranty coupons, they were not providing a service to the customer who owned the motor vehicle, but rather facilitating warranty coverage beyond the normal period.

3. Upon reviewing the appeal records, the Tribunal found that the original authority erred in considering the extended warranty amount collected by the appellant on behalf of the manufacturer as taxable under the authorized service station category. The Tribunal emphasized that an authorized service station typically provides services to customers bringing in vehicles for service or repair, which was not the case with the appellant's sale of extended warranty coupons. The Tribunal concluded that the appellant's activity did not fall within the scope of the tax entry for authorized service stations.

4. Consequently, the Tribunal held that the impugned order lacked merit and ruled in favor of the appellant by allowing the appeal and setting aside the original order. The judgment was pronounced and dictated in open court on 07/08/2017.

This detailed analysis of the judgment highlights the key arguments presented, the Tribunal's reasoning, and the final decision in favor of the appellant regarding the tax liability on the sale of extended warranty coupons.