2023 (7) TMI 1178 - AT - Service Tax

Levy of Service Tax - Business Support Service/ Business Auxiliary Service - handling and forwarding charges collected by the appellant from their customers - HELD THAT - From the invoice it can be seen that VAT 12.5% was calculated on the total value i.e. basic price plus handling and forwarding charges and paid to the concerned State authorities. In this fact, as per the above invoice, handling and forwarding charges nothing but part of the sale value of the vehicle sold by the appellant to their customer. It is obvious that sale value consists of various elements and the same cannot be vivisected to contend that some part of the value represent to the sale of goods and some part towards service. Once on total value the VAT is paid then on any part of such value service tax cannot be demanded. From the principle laid-down by Hon ble Supreme Court in the case of CST vs. UFO Moviez India Limited 2022 (7) TMI 1064 - SUPREME COURT , it is settled that when VAT has been paid on the sale of goods, the question to claim service tax thereon does not arise. Even in the worse situation in various cases where the parts and components were used in repair and maintenance of motor vehicle even then merely because the part so used in repairs and maintenance were separately billed and VAT was paid thereon, the Tribunal held that on value of such parts, though used for repair and maintenance service of the vehicle will not be liable to service tax as the same was suffered VAT. The conclusion drawn is that when there is sale of goods and VAT is paid no service tax can be demanded. In the present case, it is undisputed that the element i.e. amount towards Handling and Forwarding charges, the appellant have shown as part of the sale value of the goods and VAT was paid - the present case the demand is not sustainable - Appeal allowed.

Summary

Issues Involved:
- Liability of service tax on handling and forwarding charges collected by an automobile dealer from customers.

The judgment addressed the issue of whether handling and forwarding charges collected by the appellant from customers are liable to service tax under the head of Business Support Service/ Business Auxiliary Service. The appellant, an automobile dealer, argued that since VAT was paid on the total value of the invoice including these charges, service tax cannot be charged on the same activity. The appellant cited various judgments to support their argument. The Tribunal noted that the handling and forwarding charges were part of the sale price, as evidenced by the invoice where VAT was calculated on the total value. Referring to legal precedents, including a Supreme Court decision, the Tribunal concluded that when VAT has been paid on the sale of goods, service tax cannot be claimed on the same value. Therefore, the demand for service tax on handling and forwarding charges was deemed unsustainable, and the impugned order was set aside, allowing the appeal.

Additionally, the judgment referenced previous cases where it was established that even in situations involving the sale of spare parts for vehicle maintenance, if VAT was paid on the parts, service tax could not be levied on the same value. The Tribunal emphasized that when VAT is paid on the sale of goods, the question of claiming service tax does not arise, as per legal principles affirmed by the Hon'ble Supreme Court and previous Tribunal decisions. The Tribunal dismissed the appeal filed by the Revenue, as the handling charges incurred by the appellant were considered part of the sale value of goods on which VAT was paid, aligning with the legal precedent that service tax cannot be demanded in such cases.