2019 (6) TMI 737 - AT - Service Tax

Valuation - inclusion of value of the materials consumed by the appellant while providing the services in the assessable value - N/N. 12/2003 - Time limitation - HELD THAT - The Hon ble Apex Court in the case of SAFETY RETREADING COMPANY (P) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SALEM M/S TYRESOLES INDIA PRIVATE LMITED VERSUS THE COMMISSIONER OF CENTRAL EXCISE GOA AND M/S LAXMI TYRES VERSUS COMMISSIONER OF CENTRAL EXCISE PUNE 2017 (1) TMI 1110 - SUPREME COURT has held that value of materials cannot be included for arriving at the total taxable value on which VAT has been discharged. Following the said decision we are of the view that the demand raised including value of materials cannot sustain. The learned counsel has submitted that if the value of materials is excluded from the total taxable value as raised in the show-cause notice the appellant would fall within the threshold limit for the disputed period. However this fact requires to be verified. For the limited purpose of verifying as to whether the appellant falls within the threshold limit the matter is remanded to the adjudicating authority. Time Limitation - HELD THAT - The appellant has not taken any Service Tax or Central Excise registration. The Board by its Circular dated 27.02.2012 has only clarified that the tyre retreading activity is subject to levy of service tax. The said Circular does not give any confirmation that the Board was having any doubt as to whether it would be manufacture. The evasion of tax would not have come to light but for interference by department - the contentions raised by the appellant that the extended period is not invocable cannot sustain. The appeal is partly allowed and remanded for the limited purpose of verification and reqantification by excluding the material consumed for providing the services from the total quantity of taxable value and if so to verify whether the appellant would be eligible for threshold limit exemption.

Summary

Issues:
1. Taxability of services provided by the appellant under Management, Repair, and Maintenance Services category.
2. Exclusion of the value of materials consumed by the appellant while providing services.
3. Applicability of the threshold limit for the appellant.
4. Allegation of suppression of facts with intent to evade payment of service tax.
5. Invocability of the extended period for demanding service tax.
6. Clarifications provided by the Board regarding the taxability of retreading activity.

Analysis:

1. The appellant was engaged in repairing and reconditioning tyres of automobiles, providing taxable services under Management, Repair, and Maintenance Services category. The appellant did not register or pay service tax under this category, leading to the issuance of a show-cause notice for demanding service tax, interest, and penalties. The original authority and the Commissioner (Appeals) confirmed the demand. The appellant challenged this decision in appeal.

2. The appellant argued that the value of materials consumed while providing services should be excluded from the total value as per Notification No.12/2003. Citing a Supreme Court decision, the appellant contended that excluding the value of materials would make them eligible for the threshold limit exemption. The appellant also referred to a Board circular regarding the taxability of retreading old tyres, claiming there was doubt during the relevant period.

3. The Revenue representative supported the findings in the impugned order, highlighting discrepancies in the appellant's reporting of material values. The representative suggested that the matter should be remanded to verify if the appellant falls within the threshold limit.

4. The Tribunal observed that the demand was raised by including the value of materials in the total taxable value. Citing a Supreme Court decision, the Tribunal agreed that the value of materials should be excluded. The matter was remanded to verify if the appellant falls within the threshold limit, with a reminder that VAT and service tax are mutually exclusive.

5. The appellant's argument on limitation based on the Board's circular was rejected. The Tribunal found that the circular clarified the levy of service tax on tyre retreading activity but did not confirm any doubt regarding its classification. The Tribunal held that the extended period for demanding service tax was invocable, dismissing the argument on limitation.

6. The appeal was partly allowed, remanded for verification and re-quantification by excluding the material consumed for services from the total taxable value. The Tribunal directed to verify the appellant's eligibility for the threshold limit exemption. The appeal was partly allowed based on these terms.