2018 (10) TMI 1071 - AT - Service Tax

Valuation - Maintenance and Repair Services to various motor vehicles - includibility - whether cost of such spare parts, lubricants etc. is required to be added in the cost of the services provided by them? - Held that - Reference can be made to this Bench s decision in the case of Tanya Automobiles Pvt. Ltd. v. Commissioner of Central Excise & Service Tax, Meerut-I 2016 (1) TMI 704 -CESTAT ALLAHABAD , wherein it was held by relying upon precedent decisions that the value of the parts used during the course of repair of the services would not represent the value of the services, so as to require their addition in the value of the services - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Tax liability on spare parts and accessories used in maintenance and repair services.
2. Treatment of incentives received from principal as Business Auxiliary Services.

Analysis:

Issue 1: Tax liability on spare parts and accessories used in maintenance and repair services

The appellant, an authorized dealer of Maruti Vehicles operating a service station, faced proceedings regarding the addition of the cost of spare parts, lubricants, etc., in the services provided. The Revenue claimed that such costs should be included in the service value for taxation purposes. However, the Tribunal referred to the decision in the case of Tanya Automobiles Pvt. Ltd., affirming that the value of parts used during service does not represent the service value. The Tribunal further cited the case of M/s T. M. Motors Pvt. Ltd., emphasizing that incentives received for achieving sales targets do not form part of the service value. Consequently, the Tribunal ruled in favor of the appellant, setting aside the demand for service tax and penalty.

Issue 2: Treatment of incentives received from principal as Business Auxiliary Services

Additionally, the Revenue alleged that incentives received by the appellant from Maruti Udyog for meeting sales targets should be considered as Business Auxiliary Services, leading to demands for service tax and penalties. However, the Tribunal relied on previous decisions to establish that such incentives are not to be included in the service value. Citing precedents, the Tribunal concluded that the incentives from the principal do not constitute part of the service value, aligning with the decisions in favor of the appellant. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the assessee.

In conclusion, the Tribunal's judgment in the case addressed the issues of tax liability on spare parts used in services and the treatment of incentives received from the principal. By referencing relevant precedents, the Tribunal ruled in favor of the appellant, emphasizing that the costs of spare parts and incentives received do not form part of the service value for taxation purposes. The decision provided clarity on the taxation aspects related to the services provided by the appellant, ultimately setting aside the demands for service tax and penalties imposed by the Revenue.