2017 (4) TMI 501 - AT - Service Tax

Business Auxiliary Service - procurement of goods - appellants are purchasing the spares from the various sources. The appellants are also clearing the said spares to their clients on payment of VAT of the entire value of the goods - Scope of Notification No. 12/2003-ST - Held that - The said notification provides that if during the provision of the services any goods are sold the value of such sales is excluded from the value of the services. Ld. Counsel has argued that in the instant case, the value on which service tax has been demanded is the same value at which the goods have been sold. Therefore, the entire value is exempt in terms of Notification No. 12/2003-S.T. In respect of transactions where contracts create an obligation on the appellants to provide spares, we set-aside the impugned order and remand the case to Commissioner (Appeals) to answer the question regarding availability of Notification No. 12/2003-ST or otherwise. In respect of transactions where there is no such obligation in the contract, the demand is set-aside. - Matter remanded back.

Summary

Issues:
1. Whether the appellant is liable to pay service tax for providing Business Auxiliary Service.
2. Whether the appellant is entitled to exemption under Notification No.12/2003-ST.

Analysis:
1. The appellant, engaged in manufacturing excisable goods and supplying spares to clients, was alleged by the Revenue to provide Business Auxiliary Service. The Commissioner confirmed the demand for service tax on the entire value of spares supplied. The appellant contended that they were engaged in trading and not providing a taxable service. They argued for exemption based on a Tribunal decision and VAT payments. The Tribunal noted varying contract terms with clients, some requiring spares supply guarantees and others not. Contracts with guarantees were considered service transactions, especially with penalty clauses for non-compliance. The Tribunal remanded the case to consider the applicability of Notification No.12/2003-ST for transactions with spares supply obligations.

2. The appellant's argument for exemption under Notification No.12/2003-ST was based on the value of goods sold being equal to the value on which service tax was demanded. The appellant relied on a circular clarifying the exclusion of goods sold value from taxable service value. The Tribunal observed that the impugned order did not address this contention adequately. For transactions with no spares supply obligations, the demand was set aside. The Tribunal remanded the case to determine the availability of the exemption for transactions with spares supply obligations. The appeal was disposed of accordingly.