2013 (11) TMI 802 - AT - Service Tax

Valuation - Exemption Notification No.12/03-ST - Value of spare parts used while providing such service within the warranty period - Waiver of pre deposit - Held that - The meaning of sale used in the Finance Act, 1994, and in Rules made thereunder, has to be understood as it is defined in the Central Excise Act, 1944 and as per such definition at Rule 2(h) there is a sale of property when there is transfer of possession of goods by one person to another for valuable consideration. In the facts of the case there is payment of valuable consideration by HML and transfer of possession to the customer of HML. The question whether it is sale to HML can be considered at the time of final hearing of appeal. Considering the decision of the Hon. Apex Court in the case of BSNL Vs. Union of India 2006 (3) TMI 1 - Supreme court , prima facie, we are of the view that service tax is payable only on the value of the services and not on the value of goods involved in this transaction - Prima facie case in favour of assessee - Stay granted.

Summary

Issues:
1. Whether the value of spare parts used by an "Authorized Service Station" during the provision of free services within the warranty period should be included in the value of service for the purpose of service tax assessment.
2. Whether Notification No.12/03-ST, which exempts the value of goods sold while providing services, is applicable in this case where spare parts are used and reimbursed by the manufacturer.

Analysis:
1. The case involves a dispute regarding the inclusion of the value of spare parts used by an "Authorized Service Station" in the value of services provided during the warranty period for motor cars manufactured by a specific company. The Revenue contended that the value of spare parts should be part of the service value subject to service tax, leading to a demand for short-paid service tax. The applicant maintained a stock of spare parts, used them for services, and received reimbursement from the manufacturer. The Tribunal examined the definition of 'sale' under the Finance Act, 1994, and the Central Excise Act, 1944, emphasizing the transfer of possession of goods for valuable consideration. The Tribunal opined that service tax is payable only on the value of services, not on the value of goods involved in the transaction. The issue of whether the transaction constituted a sale to the manufacturer was left for further consideration during the final hearing.

2. The applicant argued that the spare parts constituted goods sold by them, and since the manufacturer reimbursed the cost of goods used for services, the value of goods sold was exempted under Notification No.12/03-ST. The Revenue contended that the notification applied only to cases involving the sale of goods by the service provider to the recipient, which was not the situation in this case. Additionally, the Revenue highlighted the absence of VAT payment for the transaction of goods and referred to a relevant Board's Circular. The Tribunal, considering the arguments and legal precedents, granted a waiver of pre-deposit for the adjudged dues and stayed the collection until the appeal's disposal, pending further examination of legal aspects during the final hearing.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, and the Tribunal's rationale in resolving the dispute concerning the service tax treatment of spare parts used by an "Authorized Service Station" during the warranty period.