2014 (9) TMI 480 - HC - Service Tax

Valuation of service - Whether abatement of cost of material replaced for repair of transformer as stipulated under Notification No. 12/2003. S.T. dated 20.06.2013 is admissible to the respondent or service tax is liable on gross value of bill charges from customers as laid down under Section 67 of the Finance Act, 1994 - Held that - in the invoices issued by the assesssee, the value of goods used, such as transformer oil and service charges are shown separately and in respect of the supply of consumables used in providing the service of repair, sales tax or, as the case may be, VAT is paid. The Tribunal, in this factual situation, observed that when the value of goods used was shown separately in the invoices on which sales tax or VAT has been paid, the service tax would be chargeable only on the service/labour component and the value of goods used for repair would not be includible in the assessable value of service. In the grounds which have been formulated by the revenue, the admitted position of fact has not been disputed, as stated in the order of the Tribunal. Hence, the appeal will not give rise to any substantial question of law particularly having regard to the earlier judgment of the Division Bench in Balaji Tirupati Enterprises 2014 (1) TMI 404 - ALLAHABAD HIGH COURT - Decided against Revenue.

Summary

Issues:
- Interpretation of Notification No. 12/2003 S.T. dated 20.06.2013 regarding abatement of cost of material replaced for repair of transformer
- Liability to pay service tax on gross amount charged in the repair of transformers including consumables like transformer oil and component parts
- Applicability of service tax on the service/labour component only when the value of goods used is shown separately in the invoices

Analysis:

The appeal before the Allahabad High Court stemmed from a Customs, Excise and Services Tax Appellate Tribunal order dated 26 February 2014. The primary question of law raised by the revenue was whether abatement of the cost of material replaced for repair of a transformer under Notification No. 12/2003 S.T. dated 20.06.2013 should be granted to the respondent or if service tax is leviable on the gross value of bill charges from customers as per Section 67 of the Finance Act, 1994.

The Tribunal deliberated on the issue of whether the assessee was obligated to pay service tax on the total amount charged for repairing transformers, which included the value of consumables like transformer oil and component parts. Notably, the Tribunal noted that the invoices issued by the assessee distinctly separated the value of goods used, such as transformer oil and service charges, with sales tax or VAT being paid on the consumables supplied for repair services. In light of this factual scenario, the Tribunal concluded that when the value of goods used was itemized separately in the invoices with applicable sales tax or VAT, the service tax would be applicable solely on the service/labour component, excluding the value of goods utilized for repair from the assessable service value.

The counsel representing the revenue brought to the Court's attention a prior decision of the same Court in Commissioner, Customs and Central Excise Vs. Balaji Tirupati Enterprises, where a similar issue was decided against the revenue. Acknowledging the undisputed factual position as per the Tribunal's order and the precedent set by the earlier judgment in Balaji Tirupati Enterprises, the Court determined that the appeal did not raise any substantial question of law. Consequently, the appeal was dismissed, and no costs were awarded in the matter.