2020 (1) TMI 145 - AT - Service Tax

Repairs and maintenance service - Composite service or not - inclusion of value of the materials used in rendering Repairs and Maintenance Service - appellant discharged service tax on service portion and paid sales tax on material component - Department was of the view that the being composite contract the entire value including the material component has to be taken for the purpose of determining the taxable value of services - demand of differential duty along wit interest and penalty - HELD THAT - In SAFETY RETREADING COMPANY (P) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, SALEM, M/S TYRESOLES INDIA PRIVATE LMITED VERSUS THE COMMISSIONER OF CENTRAL EXCISE, GOA AND M/S LAXMI TYRES VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE 2017 (1) TMI 1110 - SUPREME COURT the issue has been decided, where the Hon ble Apex Court took the view that the spare parts/materials used for repairs and maintenance cannot be said to have been not sold to the customers. In any annual maintenance contract, the spare parts etc., which have been used in the course of maintenance service are definitely considered to be sold and when sales tax has been paid on the value of such goods, simultaneously, one cannot charge them to service tax. In the present case, the demand raised herein is on the value of materials, on which VAT has already been discharged. The demand do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of service tax on composite contract including material component

Analysis:
The case involved the issue of demanding differential service tax on the value of materials used in providing Repairs and Maintenance Service. The appellant had paid VAT on the material component, and the department contended that service tax should also be levied on the same amount. The appellant argued that when sales tax had been paid on materials, service tax should not be charged simultaneously on the same value. The appellant relied on the Tribunal's decision in M/s. WIPRO GE Medical Systems Pvt. Ltd. case, which was upheld by the Supreme Court. Additionally, the appellant cited the case of M/s. Safety Retreading Co. (P) Ltd., where the Apex Court held that spare parts/materials used in maintenance services are considered sold, and if sales tax has been paid on them, service tax cannot be charged on the same value.

The Tribunal examined the issue in light of the precedent set by the case of M/s. Safety Retreading Co. (P) Ltd. and held that the spare parts/materials used in maintenance services are deemed sold to customers. Therefore, when sales tax has been paid on the value of such goods, charging service tax on the same amount simultaneously is not permissible. In the present case, the demand for service tax was based on the value of materials for which VAT had already been discharged. Following the established legal position, the Tribunal set aside the demand, ruling in favor of the appellant. The impugned order was overturned, and the appeal was allowed with any consequential relief that may arise.