2018 (7) TMI 1386 - AT - Service Tax

Business Auxiliary Service - activity of modification and ornamentation of motor vehicles - It is the argument of the assessee that the activity is not covered within the definition of BAS- as production or processing of goods for on behalf of the clients - Held that - In the facts of the present case, there are only two parties-the appellant as well as their customer. The customer has handed over the motor vehicle for carrying out the minor modifications to the assessee. It cannot be said in the facts of the present case that such processing has been done on behalf of a third party - there is no third party in the transaction which is a requirement for considering the activity as covered by BAS. Further, the entire activity has been considered and declared by the assessee as a supply of goods and VAT also stands paid. The levy of VAT as well as Service Tax is mutually exclusive and once the transaction has been considered and declared as sale of goods it is not open to reopen transaction and consider it as service. Appeal dismissed - decided against Revenue.

Issues:
1. Service Tax liability on modification and ornamentation of motor vehicles under Business Auxiliary Service category.
2. Justification of deducting the value of goods used in providing services.
3. Imposition of penalties in addition to Service Tax demand.
4. Classification of activities as falling under Business Auxiliary Service.
5. Consideration of entire activity as supply of goods for VAT payment.

Analysis:
1. The case involved cross-appeals by the assessee and Revenue against Order-in-Appeal No. 236/2015 dated 02/07/2015 regarding Service Tax liability on modification and ornamentation of motor vehicles. The Department contended that the activities were liable for Service Tax under Business Auxiliary Service category. The Original Adjudicating Authority ordered payment of Service Tax, interest, and penalties. The Commissioner (Appeals) provided relief by deducting the value of goods used, resulting in a reduced Service Tax demand. Both parties appealed against the decision.

2. The Revenue argued that the lower Authority erred in deducting the value of goods used in providing services and insisted on imposing penalties in addition to the Service Tax demand. The assessee challenged the entire Service Tax demand, claiming that the activities did not fall under Business Auxiliary Service. They contended that since there were only two parties involved, the levy of Service Tax under BAS was unjustified. The assessee also highlighted that the consideration received had been offered for VAT payment as supply of goods.

3. After hearing arguments from both sides, the Tribunal noted that the assessee had carried out minor modifications in motor vehicles, including installation of air conditioners, addition of carpets, and modification of seats. The assessee considered the entire consideration as supply of goods and paid VAT accordingly. The Tribunal agreed with the assessee's argument that the activity did not meet the definition of Business Auxiliary Service as it lacked involvement of a third party. It was emphasized that once a transaction was declared as a sale of goods and VAT was paid, considering it as a service for Service Tax was not justified.

4. Consequently, the Tribunal found no merit in the impugned order and set it aside. The appeal filed by the assessee was allowed, and the appeal filed by Revenue was rejected. The judgment clarified the classification of the activities, the VAT payment, and the inapplicability of Service Tax under the Business Auxiliary Service category due to the absence of a third party involvement in the transaction.

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