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TMI Blog2025 (1) TMI 896X X X X Extracts X X X X X X X X Extracts X X X X ..... he material and labour charges separately and as also indicated that in respect of the value of the materials the tax has been paid to State Government and with respect to the value of the labour charges the service tax has been paid to the Union Government. The said invoices have also been submitted to the tax authorities in the State Government and the State has passed re-assessment orders under KVAT Act. The Hon'ble Supreme Court in the case of Safety Retreading Company (P) Ltd [ 2017 (1) TMI 1110 - SUPREME COURT ] has clearly held that no dispute has been raised in the show cause notice (as in the present case also) with regard to the correctness of the figures furnished by the petitioner and at no point of time the respondents raised a plea as to the correctness of the invoices. The Division Bench of the Bombay High Court has also noticed a similar factual circumstance and relying upon the judgment of the Hon'ble Supreme Court in the case of Safety Retreading Company (P) Ltd, held that the Revenue did not dispute the invoices furnished. In the present case also, the respondents have not denied the correctness of the said bifurcation of the amounts made by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... US-000-COM-BKK-006-2018 19 (ST) passed on 23.10.2018 and issued on 05.11.2018 by respondent No. 3 (Annexure- A ) otherwise required to be made under the provisions of Section 83 of the Finance Act, 1994, read with Section 35F of the Central Excise Act 1944, should this Hon ble Court, in the facts and circumstances of the case deem it fit and proper that the petitioner ought to prefer an appeal before the Hon ble Customs Excise and Service Tax Appellate Tribunal, against the Order-In-Original No. BEL-EXCUS-000-COM-BKK-006-2018-19 (ST) passed on 23.10.2018 and issued on 05.11.2018 (Annexure- A ). 2. W.P.No.108984/2015 is filed seeking for following reliefs: (a) Issue a writ of certiorari, or any other writ, order or direction as this Hon ble Court may deem fit and proper, quashing order -in-original in No. BEL-EXCUS-000-COM-BHR-07(ST)-15-16 dated 04.06.2015 of respondent no. 3 Annexure-B as being without jurisdiction and thus illegal and untenable in law. (b) To hold that section 35F of the Central Excise Act, 1944 is arbitrary and therefore ultra vires Section 86 of the FA. (c) To pass such other orders, directions and writs as this Hon ble High Court may deem fit in the facts and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit petitions carries on the business of retreading tyres, which is a process whereby tread rubber is affixed to worn out tyres by bonding in order to reinforce them for further use. It is the case of the petitioner that the said activity involves various stages wherein the materials are procured and consumed in the process of retreading which becomes part and parcel of the retreaded tyres. That the execution of the work by the petitioner is a composite indivisible works contract. 7. It is the case of the petitioner that it is registered under the provisions of the Finance Act, 1994 [ Finance Act ] (Act of the Union of India) and the Karnataka Value Added Tax Act, 2005 [ KVAT Act ] (Act of the State of Karnataka). That the petitioner discharges Value Added Tax [ VAT ] to the State of Karnataka on 70% of the turnover, being the value of the deemed sale component and discharges Service Tax to the Union of India on 30% of the turnover being the value of the service provided. 8. The respondent authorities/Revenue have issued the impugned orders-in-original seeking to levy service tax on the entire turnover of the value of the service provided by the petitioner, which the petitioner has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A reading of this judgment, on which counsel for the assessees heavily relied, would go to show that the separation of the value of goods contained in the execution of a works contract will have to be determined by working from the value of the entire works contract and deducting therefrom charges towards labour and services. Such deductions are stated by the Constitution Bench to be eight in number. What is important in particular is the deductions which are to be made under sub-paras (f), (g) and (h). Under each of these paras, a bifurcation has to be made by the charging Section itself so that the cost of establishment of the contractor is bifurcated into what is relatable to supply of labour and services. Similarly, all other expenses have also to be bifurcated insofar as they are relatable to supply of labour and services, and the same goes for the profit that is earned by the contractor. These deductions are ordinarily to be made from the contractor s accounts. However, if it is found that contractors have not maintained proper accounts, or their accounts are found to be not worthy of credence, it is left to the legislature to prescribe a formula on the basis of a fixed per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the two elements completely for if some element of transfer of property in goods remains when a service tax is levied, the said levy would be found to be constitutionally infirm (emphasis supplied) 13. It is clear from the same that the portion of the contract relating to the value of deemed sale as assessed and taxed by the State to sales tax/VAT is conclusive and the same cannot be subjected to tax by the Union of India as service tax. 14. At this stage, it is relevant to notice that the petitioner has furnished the copies of the tax invoices that have been maintained by it, which has been submitted to the Revenue wherein the petitioner has clearly stipulated the value of the VAT of 5.5% on the materials (which is levied by the State) and service tax of 14% on labour charges (which is levied by the Union). The said invoices clearly stipulates the portion of the amount collected as material charge and the portion of the amount collected as labour charges. 15. It is also relevant to note that the petitioner has submitted these invoices to the Taxation Authorities in the State and the State of Karnataka has passed reassessment orders under the KVAT Act on the said basis. 16. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt was considering a challenge made by the petitioner. In the said case, the order of the CESTAT has been noticed as follows: 7. A demand for levy of tax on the gross value of the service rendered including the cost of materials used and transferred was raised and answered against the assessee leading to an appeal before the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Chennai (hereinafter referred to as appellate Tribunal ). The learned appellate Tribunal returned a split verdict with the Technical Member taking the view that the gross value of the service rendered would be exigible to tax under the Act. The third member (Technical) to whom the matter was referred held as follows: 21. From the foregoing, the following emerges: a) There is no evidence of sale of materials in rendering the impugned service of Maintenance and Repairs . b) Maintenance and Repair Service being as specific service cannot be treated as service under the category of Works Contract for the service tax purposes. c) The concept of deemed sales is relevant only in respect of services under the category of Works Contract and not in respect of Maintenance and Repair Service . d) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice tax has been sought to be levied at the prescribed rate of ten per cent (10%) on the differential amount. It is now stated before us that the aforesaid figures have been furnished by the assessee himself and, therefore, must be understood not to be authentic. This, indeed, is strange. No dispute has been raised with regard to the correctness of the said figures furnished by the assessee in the show cause notice issued to justify the stand now taken before this Court; at no point of time such a plea had been advanced. 13. Besides the above, the affidavit of the learned Commissioner, referred to above, proceeds on the basis that the appellant assessee is also liable to pay service tax on the remaining seventy per cent (70%) towards material costs in addition to the 30% of the retreading charges. This is clear from the following averments made in the said affidavit of the learned Commissioner: The relevant bills showed that the Appellant had paid service tax only on the labour component after deducting 70% towards material cost on the gross tyre Retreading charges billed and received for the period from 16.06.2005. In short, they have paid service tax only on the 30% of the tyre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appeal before the Appellate Authority. It is further contended by the Revenue that the present case covering the period from April 2012 to June 2016, changes have been made by the Government in Service Tax vide Notification No.12/2003-ST dated 20.6.2003 which is rescinded by Notification No. 34/2012-ST dated 20.6.2012 w.e.f., 1.7.2012 and that the service of retrading from 1.7.2012 is required to be considered differently under the provisions of the Finance Act. 22. It is relevant to notice here that pursuant to the judgment of the Hon'ble Supreme Court in the case of Safety Retreading Company (P) Ltd the petitioner/assessee relied upon the same before the CESTAT in Appeal No.ST/1180/11-DB and other connected matters. The CESTAT vide Final Order bearing No.23255-260/2017, dated 13.12.2017 has categorically held that the decision of the Hon'ble Supreme Court covers the issues involved in the said appeal. However, it is relevant to note that in the said appeals the orders-in-original for various periods prior to 1.7.2012 were under consideration. 23. It is also relevant to note that the Division Bench of the Bombay High Court in the case of Tyresoles India Pvt. Ltd., v. Uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks certain basic features of the case, namely undisputed assessment of the assessee under the local Act; the case projected by the Department itself in the show cause notice; and thirdly the affidavit filed before this Court by one S. Subramanian, Commissioner of Central Excise, Salem . The Apex Court noted that no dispute whatsoever had been raised with regard to the assessment of the appellant on its turnover under the local/State Act, insofar as payment of Value Added Tax on that component (70%) is concerned. Therefore, the reasoning reflected in paragraphs 11, 12 and 13 of the decision of the Apex Court in Safety Retreading Co. (P) Ltd. (supra) is sufficient to reject Ms. Dessai's contention relating to the alleged non-compliance with the conditions of the exemption under Notification dated 20 June, 2003. 23. Mr. Rajesh Chander Kumar, the Learned Counsel for the petitioner has pointed out that for the period of disputes between April 2009 to March 2010, April 2008 to September 2008, April 2010 to July 2011, August 2011 to March 2012, October 2008 to March 2009, October 2007 to March 2008, October 2006 to September 2007, the respondents on the basis of reasoning now record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and relying upon the judgment of the Hon'ble Supreme Court in the case of Safety Retreading Company (P) Ltd , held that the Revenue did not dispute the invoices furnished. In the present case also, the respondents have not denied the correctness of the said bifurcation of the amounts made by the petitioner/assessee. Hence, the same is required to be accepted in the present case also. 27. Further, the contention of the Revenue that there is a change in the legal position subsequent to 1.7.2012 having regard to the issuance of the Notification dated 20.6.2012, is also untenable and liable to be rejected in view of the fact that the Hon'ble Supreme Court in the case of Safety Retreading Company (P) Ltd has categorically held that the Service tax sought to be levied by the respondent - Union on the entire gross value of service rendered is untenable and that the assessee is liable to pay the service tax only on the service component under the State Act. Hence, the Notification dated 20.6.2012 which is applicable to the transactions after 1.7.2012, does not in any manner alter the said position. The said notification only alters the definition of what is defined as service . 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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