2017 (8) TMI 907 - AT - Service Tax

Valuation - includibility - sale of spare parts and service of generators, as an authorized service agent - whether, appellant are liable to pay Service Tax on the cost of spares, including lubricating oils sold for which they have raised separate invoice and paid Sales Tax/Value Added Tax? - Held that - the appellant have under the facts and circumstances raised separate invoices for the material component used in the course of repair and maintenance of generators. Further, they have paid CST/VAT on such spare parts, including lubricating oils etc. - Sales Tax & Service Tax are mutually exclusive and as such there can be no demand of Service Tax on the utilization of the spares sold in the course of repair on which Sales Tax is paid - the demand of Service Tax on the value of spares and consumables sold separately during the course of providing repairs and maintenance to the DG Sets unsustainable - penalty also set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant, engaged in the sale of spare parts and service of generators, is liable to pay Service Tax on the cost of spares sold separately during repair and maintenance.

Analysis:
The case revolved around the issue of whether the appellant, involved in the business of selling spare parts and providing generator services, was obligated to pay Service Tax on the spare parts sold separately during repair and maintenance activities. The appellant, registered with both Sales Tax and Service Tax Departments, raised distinct tax invoices for materials like filters, lubricating oils, etc., used in the service process. The appellant paid CST/VAT on these spare parts, indicating a clear separation of the material component from the service charges. The Commissioner contended that the appellant should pay Service Tax on the value of spare parts consumed during repair and maintenance, even if CST/VAT had been paid on them. However, the Tribunal disagreed with this view, emphasizing the mutual exclusivity of Sales Tax and Service Tax. The Tribunal held that there could be no demand for Service Tax on spare parts used in repairs if Sales Tax had already been paid on them. Consequently, the Tribunal found the demand for Service Tax on spare parts to be unsustainable and allowed the appeal partially. The penalty imposed was also set aside, and the appellant's other grounds of appeal were not pressed.

In conclusion, the Tribunal's decision clarified that Sales Tax and Service Tax are distinct, and Service Tax cannot be levied on spare parts sold separately during repair and maintenance if Sales Tax has already been paid on them. The judgment provided relief to the appellant by setting aside the demand for Service Tax on spare parts and consumables, thereby allowing the appeal in part and nullifying the penalty imposed.