2024 (3) TMI 1177 - AT - Service Tax

Short payment of service tax - service of Authorised Service Station for Motor Vehicle servicing and repairing - non-addition of the value of consumable used while providing service to vehicle owners and free service commission in the taxable value - HELD THAT - The issue as regards includability of the cost of spares in the gross taxable value is in contradiction as regards Circulars dated 05.03.2003 and 23.08.2007. It is observed that positive findings need to be recorded on the basis of factual verification as regards existence of separate bills for spare parts and/ or payment of sales tax/VAT thereon before arriving to the conclusion to drop demand. It is found that separate invoices were not found as regards the Assessee having carried out installations on CNG kits that despite the assessee having carried out such installations and paid VAT thereon, it cannot be ipso facto concluded that they have not rendered any taxable service and are not liable to service tax. Therefore in the interest of justice the said issues need to be examined in depth. The issue needs to be remanded to the adjudicating authority for reconsidering the value for demand taking to consideration the dispute raised in the show cause notice and submissions made by both the sides. The appeal is allowed by way of remand to the adjudicating authority to decide the issues de-novo.

Summary

Issues involved:
The issues involved in the judgment are:
1. Whether the Commissioner erred in dropping the demand of Rs.87,25,472/- by not following Circular No. 96/7/2007 - ST dated 23.08.2007.
2. Whether the Commissioner erred in dropping the demand of Rs.6,28,306/- in respect of taxable services of Installation of CNG Kits provided to customers, since sales tax/VAT remained paid on the same.
3. Whether the Commissioner erred in extending the benefit of cum-tax benefit to the assessee, resulting in dropping of demand of Rs.42,985/-.

Summary:
The appeal was filed by the Revenue against the Order-in-Original passed by the Commissioner of Customs and Central Excise, Surat. The case involved M/s. J.K. Motors, engaged in providing services as an 'Authorised Service Station' for Motor Vehicle servicing and repairing. The audit revealed that the company did not include the value of consumables used in servicing vehicles and free service commission in the taxable value, resulting in a short payment of service tax. The Commissioner confirmed a demand of Rs.3,99,413/- along with interest and penalty, while dropping a demand of Rs.93,96,763/- as per the show cause notice.

The Revenue contended that the Commissioner erred in not following Circular No. 96/7/2007 - ST dated 23.08.2007 and in extending the benefit of cum-tax to the assessee. The issue of includability of the cost of spares in the gross taxable value was in contradiction with previous Circulars. The Tribunal observed the need for factual verification regarding separate bills for spare parts and payment of sales tax/VAT before concluding on dropping the demand. The absence of separate invoices for CNG kit installations led to the decision that payment of VAT does not exempt the company from service tax liability.

The Tribunal allowed the appeal by remanding the matter to the adjudicating authority for a fresh decision considering the issues raised in the show cause notice and submissions from both sides. The appeal was allowed for reconsideration of the issues in light of the discussions, and the case was disposed of accordingly.