2020 (2) TMI 1066 - AT - Service Tax

Levy of service tax - administrative charges collected during sale of vehicle - demand alongwith interest and penalty - HELD THAT - A close perusal of the case record would reveal that appellant had collected those charges on the sale invoices itself as part of price of vehicle sold and only in their books of account, it was wrongly shown as administrative charges (para 6 of the Order-in- Original). Further, the total value of the vehicle including the above sale expenditure is maintained by the appellant as per the catalogue price declared by the vehicle manufacturing company. This being the factual aspect and Service Tax collection being dependent on the invoice value of services rendered which is un-associated with a sale invoice on which GST/Sales Tax is levied, Service Tax cannot be demanded on the same value which has been absorbed in the sale price of the vehicle. The demand of Service Tax on such price solely on the basis of wrong reflection in the books of account (ledger) is not in conformity to the law and same is required to be set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of Service Tax on administrative charges collected during the sale of a vehicle.

Analysis:
The case involved a demand of Service Tax amounting to ?1,50,051 on administrative charges collected during the sale of a vehicle. The appellant, an authorized dealer of a vehicle manufacturing company, collected ?2,000 from each customer during the sale of a new vehicle, which was credited as administrative charges. The Service Tax Department considered this amount as part of the service component, leading to a show-cause cum demand notice to the appellant. The appellant challenged the duty demand, interest, and penalties imposed by the Commissioner (Appeals).

The appellant argued that the charges collected were for pre-delivery expenses, fuel expenses, pooja expenses, and handling charges, not related to business support services. The Tribunal noted that the charges were reflected as administrative charges in the books of account but were actually part of the sale price of the vehicle. The total value of the vehicle, including these charges, was maintained as per the catalogue price declared by the manufacturing company. As Service Tax is based on the value of services rendered, separate from GST or Sales Tax on the sale invoice, demanding Service Tax on the same value already included in the sale price was deemed inappropriate.

The Tribunal found that demanding Service Tax solely based on the incorrect reflection in the books of account was not in accordance with the law. Therefore, the demand of Service Tax on these charges was set aside, and the appeal was allowed. The order of the Commissioner of Central GST & Central Excise (Appeals) was overturned, providing relief to the appellant.