2014 (1) TMI 514 - AT - Service Tax

Valuation - Whether the value of the goods used by the appellant while carrying out repair activities is required to be added in the value of the services - Held that - One part of the contract relates to the scope of repair work and the other part of the contract relates to supply of parts. We have also seen the sample invoices raised by the appellant where the value of the goods / inputs used by them for replacing the old parts have been shown separately - if an assessee, while carrying out of the annual maintenance contract, also used certain goods for the said purpose, the cost of which goods has to be borne by the buyer, it has to be treated as sale of the goods and not part of services - Following decision of CC&CE vs. Balaji Tirupati Enterprises 2014 (1) TMI 404 - ALLAHABAD HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Whether the value of goods used during repair activities should be added to the value of services for service tax liability.

Analysis:
The appellant, engaged in transformer manufacturing and repair, was paying service tax on labor and repair charges. The Revenue argued that the value of goods used in repairs should also be included in the service value. The main issue was whether the cost of goods used in repair activities should be considered for service tax liability.

The Tribunal examined sample contracts and invoices showing the separation of repair work scope and parts supply. Referring to a Supreme Court case, it was noted that if the buyer bears the cost of goods used during maintenance, it should be treated as a sale of goods, not part of services. Previous Tribunal decisions, such as Balaji Tirupati Enterprises vs. CCE and others, had excluded the value of goods used in repairs from service costs. The Tribunal also mentioned a decision by the Allahabad High Court rejecting the Revenue's appeal on similar grounds.

The Tribunal dismissed the Revenue's reliance on a previous case, stating that later Tribunal and High Court decisions should be followed. By aligning with the legal precedents set by the Tribunal, Supreme Court, and Allahabad High Court, the impugned order was set aside, and the appeal was allowed in favor of the appellant. The judgment emphasized the importance of considering the separation of goods and services in repair contracts for determining service tax liability.