2023 (10) TMI 58 - AT - Service Tax

Levy of Service Tax - amount reimbursed for repairs carried out during the warranty period and other free services - April 2006 to March 2007 - HELD THAT - For earlier period i.e. May 2003 to March 2004 and April 2006 to March 2007 in appeal No.ST/582/2008 and ST/583/2008, similar issue was considered by this Tribunal and following the ratio laid down in the case of COMMISSIONER OF CENTRAL EXCISE, INDORE VERSUS JABALPUR MOTORS LTD. 2015 (1) TMI 1140 - CESTAT NEW DELHI , the impugned orders were set aside and the appeals filed by the appellant were allowed, where the Tribunal held t he free services are rendered to the car buyers and not to M/s. MUL and the car buyers pay nothing therefor. Seen in this light it is evident that the demand of service tax as per column 5 of the table above is misconceived. There are no reason not to follow the said judgment of this Tribunal delivered for the earlier period. Consequently, following the said judgment, the present appeal is also allowed.

Summary

Issues involved:
The appeal was filed against an order passed by the Commissioner of Central Excise, Cochin, regarding the chargeability of service tax on the amount reimbursed to the appellant for providing free services during the warranty period for Hyundai cars.

Summary of Judgment:

Issue 1: Chargeability of service tax on reimbursed amount for free services
The appellants, authorized dealers for Hyundai cars, provided free services during the warranty period. The Tribunal found that the demand notice for service tax was misconceived as the free services provided to customers did not involve any charges. The Tribunal referred to previous cases and held that the liability to service tax arises from services provided to customers, not from reimbursements. It was noted that the free services were part of the dealers' functions, and no reimbursement was made by the manufacturer. The Tribunal dismissed the appeal filed by the Revenue, citing that the demand for service tax was not sustainable based on the facts presented.

Issue 2: Interpretation of dealership agreement clauses
The Tribunal analyzed the dealership agreement clauses related to free services and reimbursement rates. It was highlighted that the clause concerning free warranty services did not mention any reimbursement, and the demand for service tax was based on a clause unrelated to free warranty. The Tribunal emphasized that the free services provided to car buyers were not reimbursed by the manufacturer, and the demand for service tax was deemed misconceived. Previous judgments were cited to support the view that no service tax could be levied on the amount representing the dealers' margin, which had already been taxed as part of the sale value of the cars.

Conclusion:
The Tribunal allowed the appeal, following the precedent set in previous judgments and dismissing the demand for service tax on the reimbursed amount for free services provided during the warranty period. The order of the Commissioner was set aside, and consequential relief was granted in accordance with the law.