2013 (11) TMI 251 - AT - Service Tax

Valuation - inclusion of cost of material in the value of repair and maintenance services provided during warranty period - VAT was being paid on material - notification no. 12/2003 - Whether there is a sale of goods to the service recipient in a case where value of the goods is paid by the service recipient but the possession is handed over to the owner of the vehicle is a legal issue to be decided at the time of hearing of the appeal - Held that - In the matter of cenvat credit, it is not clear as to what type of burden the applicant is expected to discharge so long as Revenue has not pointed out any instances of the applicant having taken Cenvat credit on materials used. Further, from the invoices placed before us we are of the view that the dispute is about parts used and not consumables and if at all there is any consumable involved the proceedings before the lower authorities have not segregated the quantum attributable to consumables - It is proper to grant waiver of pre-deposit of dues arising from the impugned order in this case also for admission of appeal - stay granted.

Summary

Issues:
1. Applicability of Notification No.12/03-ST for exemption on service tax.
2. Whether the sale of goods to the service recipient is essential for claiming exemption.
3. Burden of proof on the applicant regarding Cenvat credit on materials used.
4. Differentiation between parts used and consumables in the service provided.

Analysis:

1. The case involved the applicant, an authorized dealer of vehicles, who provided free service for new vehicles during the warranty period. The dispute arose regarding the payment of service tax on the cost of materials used during the warranty period, with the applicant claiming exemption under Notification No.12/03-ST. The Revenue contended that the notification did not apply, leading to the initiation of recovery proceedings for unpaid service tax.

2. The applicant argued that since they were already paying VAT on the materials sold, the value of materials used should not be considered as part of the service provided for service tax purposes. Citing the decision in Bharat Sanchar Nigam Ltd. Vs UOI, they claimed that taxing the same aspect by both State and Central Governments in a composite transaction was not permissible. They sought admission of their appeal without any pre-deposit.

3. The Revenue opposed the applicant's contention, stating that to claim exemption under the notification, there should be a sale of goods to the service recipient. They highlighted that the applicant failed to prove that they had not claimed any Cenvat credit on the materials used. The Revenue also differentiated between parts and consumables, arguing that while there might be a dispute regarding parts, consumables should not be disputed.

4. The Tribunal considered the arguments from both sides and noted that the question of whether there was a sale of goods to the service recipient needed to be decided during the appeal hearing. Regarding Cenvat credit, the Tribunal found it unclear what burden the applicant needed to discharge, especially when the Revenue had not shown instances of Cenvat credit claimed. The Tribunal observed that the dispute mainly revolved around parts used, not consumables, and that the lower authorities had not separated the quantity attributable to consumables in the proceedings.

5. Ultimately, the Tribunal decided to grant a waiver of pre-deposit for the dues from the impugned order, similar to previous cases with comparable circumstances. The Tribunal ordered the waiver for admission of the appeal and stayed the collection of dues during the appeal process.