2023 (7) TMI 1120 - AT - Service Tax

Valuation - inclusion of value of consumables used for providing the service to various service station, in the assessable value - HELD THAT - The appellant have raised service bill on which service tax was paid and in respect of the consumables the same was sold by raising sales bill on which VAT was paid. Therefore, part for which the goods were sold clearly covered under the sale of goods on which no service tax should be charged. This issue has been considered by this Tribunal in various judgments - reliance can be placed in the case of M/S TANYA AUTOMOBILES PVT LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, MEERUT-I 2016 (1) TMI 704 - CESTAT ALLAHABAD where it was held that in view of the settled legal position in the case of Samtech Industries (2014 (4) TMI 995 - CESTAT NEW DELHI), upholding the order of this Tribunal by the Hon'ble High Court of Allahabad 2014 (8) TMI 1023 - ALLAHABAD HIGH COURT and also in view of the letter of the CBE C accepted the legal position that the cost of items supplied/sold and there is documentary proof specifically indicating value of the goods, the demand of Service Tax against the assessee for the cost of the goods supplied during repair does not appear sustainable. The issue is already settled hence, the same is no more res-integra - Appeal allowed.

Summary

Issues Involved:
1. Inclusion of value of consumables in the gross value of service for service tax purposes.
2. Applicability of VAT on consumables sold separately during vehicle servicing.

Summary:

Issue 1: Inclusion of value of consumables in the gross value of service for service tax purposes.
The appellants operate service stations providing vehicle services, raising separate invoices for servicing and consumables (e.g., lubricating oil). They paid service tax on the service bill and VAT on the consumables. The department contended that the value of consumables should be included in the gross value of the service, leading to a differential service tax demand. The Adjudicating Authority and Commissioner (Appeals) upheld this view. The appellant argued that consumables sold on a principal-to-principal basis, with VAT paid, should not be included in the service's gross value. The Tribunal, referencing various judgments, including *Samtech Industries v. Commr. C.Ex. Kanpur* and *Tanya Automobiles (P) Ltd v. Commr. C.Ex., & ST., Meerut-I*, concluded that when consumables are sold separately and VAT is paid, they should be treated as a sale of goods, not part of the service transaction. Thus, service tax should only be charged on the service component.

Issue 2: Applicability of VAT on consumables sold separately during vehicle servicing.
The Tribunal found that the appellant raised separate sales bills for consumables and paid VAT on them, indicating a sale of goods. This practice aligns with previous rulings, such as *Commr. C.Ex., & ST., Meerut-II v. Krishna Swaroop Agarwal*, where it was established that consumables sold separately with VAT paid are not subject to service tax. The Tribunal emphasized that the value of goods used for providing services, shown separately in invoices and subjected to VAT, cannot be included in the assessable value for service tax purposes. Consequently, the Tribunal set aside the impugned order and allowed the appeal with consequential relief, reaffirming that the issue is no longer res integra.