ST - Authorized Service Station - Cost of spare parts sold during rendering of service cannot form part of the transaction value - Board Circular dated 23/08/2007 also confirms this position - Matter remanded: CESTAT
By TIOL News Service
MUMBAI, SEPT 06, 2013: THE appellant is engaged in the business of providing services of Authorized Service Station for Maruti brand vehicles and they are also registered with department under the category of "Authorized Service Station" and "Business Auxiliary Service". During the course of rendering the services, the appellant also sells spare parts for the vehicles on which they discharge Sales Tax/VAT liability. The bills issued by the appellant gives details of spare parts sold both in terms of quantity and value and also the service charges for the services rendered. The VAT/Sales Tax liability on the spare parts sold is also separately indicated and the Service Tax liability on the services rendered is also separately indicated. The department was of the view that the appellant is liable to discharge Service Tax liability on the whole of the amount charged and not on the services portion alone.
A SCN demanding ST of Rs.3.55 Crores was issued for the period 2006-2007 to 2011-12 and the same was confirmed by the CCE, Nagpur along with loads of penalty and interest. For obtaining the cost of spare parts allegedly supplied to the customers while rendering services, the department relied upon the balance-sheets of the appellant.
Before the CESTAT the appellant submitted -
+ In the course of rendering the services, when goods are sold on which Sales Tax/VAT liability is discharged, the cost of such goods cannot be included in the taxable value of the services rendered. There may be some transactions, which involve only sale of spare parts without rendering of the service. In those cases, the levy of Service Tax would not arise at all.
+ In the bills raised, the appellant has clearly indicated the quantity and value of the goods sold and the Sales Tax/VAT liability discharged. They have also indicated the charges collected for the services rendered and the Service Tax liability thereon. Therefore, only the consideration received for the services rendered is liable to Service Tax.
+ Board's Master Circular Ref. no. 036.03 dated 23.08.2007 clarifying as under is also relied upon:-
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Issue
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Clarification
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Whether spare parts sold by a service station during the servicing of vehicles is liable to payment of service tax?
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Service Tax is not leviable on a transaction treated as sale of goods and subjected to levy of Sales Tax/VAT.
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The Bench held -
"4. After hearing both the sides, we find that the issue involved herein is identical to the cases decided by the Tribunal in the case of Ketan Motors ltd. and Sudarshan Motors (cited supra). In those decisions, this Tribunal had held that the cost of spare parts sold during the rendering of service cannot form part of the transaction value. The Board's Circular dated 23.08.2007 also confirms the above position. Therefore, we remand the matter back to the adjudicating authority for consideration afresh of the contention of the appellant that the cost of spare parts sold cannot be included in the value of the services rendered. The appellant is also directed to submit all documents and evidences in support of their claim that they have discharged Sales Tax/VAT on the spare parts sold during the course of rendering the service."
In fine, the appeal was allowed by way of remand.
In passing: Incidentally, on a similar issue, a notice dated 16/02/2005 was issued to the present appellant demanding service tax of Rs.2,52,543/- for the period July 2001 to February 2004 and the o-in-o confirming this demand was set aside by the Commissioner (A) by observing that in the case of authorized service stations, the cost of the spare parts are not to be included in the value of the services rendered as per section 67 of the Finance Act, 1994, as it stood at the relevant time, and since the cost of spare parts itself is not includible; therefore, handling charges incurred in respect of such spare parts also will not form part of the taxable value of the service rendered. The Revenue took this matter to the CESTAT which upheld the order of the Commissioner(A) and dismissed the Revenue appeal. See - (2013-TIOL-1023-CESTAT-MUM).
(See 2013-TIOL-1322-CESTAT-MUM)
