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2020 (6) TMI 124 - AT - Service TaxBenefit of Exemption N/N. 12/2003-S.T. dated 20.06.2003 - value of the material i.e. tread rubber etc. used in providing the service of retreading of old and used tyre under the service head of Management, maintenance or repair - the contention of the learned Commissioner (Appeals) is that since the material used in retreading has been consumed therefore the appellant will not get exemption - HELD THAT - This contention of learned Commissioner (Appeals) is solely based on the Tribunal Chennai s judgment in the case of Safety Retreading Company 2012 (6) TMI 719 - CESTAT, CHENNAI (THIRD MEMBER) . However this Tribunal judgment was reversed by the Hon ble Supreme Court as reported at Safety Retreading Company (P) Limited vs. Commissioner of C.Ex. Salem 2017 (1) TMI 1110 - SUPREME COURT wherein the Apex court considering the identical facts in as much as the tread rubber was used for retreading, has held that the value of such tread rubber is not liable to service tax. Therefore in view of this Apex Court judgment the dispute in hand came to rest and it is not res integra. As regard the clubbing of value of material sold by M/s Perfect Rubber, the material cost is not includible in the gross value of service of retreading. Moreover, the Perfect rubber is an independent proprietory concern and sale of goods by them is not in dispute. There are no reason for clubbing of value of goods sold by M/s Perfect Rubber in the value of the appellant M/s Perfect Re-treads. Therefore this reason also the value of material sold by M/s. Perfect Rubber cannot be included in the value of M/s Perfect Re-treads. Simultaneous penalty u/s 76 and 78 of FA - HELD THAT - The Jurisdictional Hon ble High Court of Gujarat in the case of Raval Trading Company vs. CST 2016 (2) TMI 172 - GUJARAT HIGH COURT held that once the penalty under Section 78 has been imposed, penalty under Section 76 cannot be imposed. The penalty under Section 76 is set aside - Since the issue relates to interpretation of Notification No.12/03-ST, the penalty under section 78 is not imposable invoking Section 80 0f the Finance Act, 1994. Accordingly, the penalty imposed under Section 78 is also set aside. Appeal allowed - decided in favor of appellant.
Issues:
1. Entitlement for exemption Notification No.12/03-ST in respect of material used in retreading old tyres. 2. Clubbing of material value sold by a separate entity with the appellant's value. 3. Imposition of penalties under Section 76 and 78 of the Finance Act, 1994. Entitlement for Exemption Notification No.12/03-ST: The main issue in the appeals revolved around whether the appellants were entitled to the exemption under Notification No.12/03-ST for the material used in retreading old tyres under the service category of "Management, maintenance or repair." The Commissioner (Appeals) initially denied the exemption, citing consumption of the material during the process of retreading and lack of separate declaration of goods quantity. However, the appellants presented documents showing separate value declaration for material and labour charges. The Tribunal noted that the appellants had clearly demonstrated the value of goods separately, supporting their case for exemption. The Tribunal also highlighted a previous judgment that had been reversed by the Supreme Court, establishing that the value of the material used for retreading was not subject to service tax. Consequently, the Tribunal ruled in favor of the appellants, affirming their entitlement to the exemption. Clubbing of Material Value with Separate Entity's Value: The issue of clubbing the material value sold by a separate entity, M/s Perfect Rubber, with the appellant's value was also addressed. The Commissioner (Appeals) had contended that the material's value sold by Perfect Rubber should be included in the gross value of service provided by the appellant, alleging an attempt to evade service tax. However, the Tribunal disagreed, emphasizing that the material cost was not to be included in the service value for retreading. Additionally, as Perfect Rubber operated independently and its sales were not in dispute, there was no justification for combining the material value sold by Perfect Rubber with the value of M/s Perfect Re-treads. Therefore, the Tribunal ruled against the clubbing of the material value, supporting the appellants' position. Imposition of Penalties under Section 76 and 78: Regarding the penalties imposed under Sections 76 and 78 of the Finance Act, 1994, the Tribunal referred to a judgment by the Jurisdictional High Court of Gujarat, which stated that if a penalty under Section 78 had been imposed, a penalty under Section 76 could not be levied. Following this precedent, the Tribunal set aside the penalty under Section 76. Considering that the issue primarily involved the interpretation of Notification No.12/03-ST, the Tribunal concluded that penalty under Section 78 was not applicable under Section 80 of the Finance Act, 1994. Consequently, the penalty imposed under Section 78 was also revoked. The appellants were directed to pay service tax solely on service charges, if any, along with any applicable interest for delayed payments. As a result, the appeals were allowed in favor of the appellants. This detailed analysis of the judgment from the Appellate Tribunal CESTAT AHMEDABAD highlights the key issues, arguments presented by both parties, and the Tribunal's comprehensive reasoning leading to the final decision in favor of the appellants.
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