Whether service tax is payable on consumables used in repair of transformers?

PJ/CASE LAW/2015-16/2779

Case:-COMMR. OF C. EX., LUCKNOW VERSUS MAHENDRA ENGINEERING LTD.

Citation:- 2015 (38) S.T.R. 233 (All.)

Brief Facts:- The brief facts of the case are that the appellant has replaced the material for repair of transformer and claim the abatement of such costs as stipulated under Notification No. 12/2003-S.T.and in invoices issued by the assessee the value of goods used, such as transformer oil and service charges are shown seperatelyand in respect of supply of consumables used in providing the service of repair, sales tax or, as the case may be, VAT is paid and the tribunal held that assessee was not liable to pay Service Tax on the gross amount charged in repair of transformers including value of consumables like transformer oil and component parts - Section 4 of Central Excise Act, 1944. Hence, revenue is in appeal before the High Court.

Appellants Contentions:- None appeared for the appellant.

Respondents Contention:-The Revenue has formulated the following question of law :“Whether abatement of cost of material replaced for repair of transformer as stipulated under Notification No. 12/2003-S.T., dated 20-6-2003 is admissible to the respondent or service tax is leviable on gross value of bill charges from customers as laid down under Section 67 of the Finance Act, 1994.”
The learned counsel appearing on behalf of the Revenue has fairly placed before the Court a decision of this Court in Commissioner, Customs and Central Excise v. Balaji Tirupati Enterprises[reported in 2013 (32) S.T.R. 530 (All.)] in which a similar issue was answered against the Revenue. In the grounds which have been formulated by the Revenue, the admitted position of fact has not been disputed, as stated in the order of the Tribunal. Hence, the appeal will not give rise to any substantial question of law particularly having regard to the earlier judgment of the Division Bench in Balaji Tirupati Enterprises (supra).

Reasoning of Judgement:-The issue before the Tribunal was whether the assessee was liable to pay Service Tax on the gross amount charged in the repair of transformers including value of consumables like transformer oil and component parts. The Tribunal has observed that in the invoices issued by the assessee, the value of goods used, such as transformer oil and service charges are shown separately and in respect of the supply of consumables used in providing the service of repair, sales tax or, as the case may be, VAT is paid. The Tribunal, in this factual situation, observed that when the value of goods used was shown separately in the invoices on which sales tax or VAT has been paid, the Service Tax would be chargeable only on the service/labour component and the value of goods used for repair would not be includible in the assessable value of service.
In view of the above findings, the appeal filed by the revenue was found to be devoid of any merits and the same was rejected.

Decision:- Appeal dismissed.

Comment:- The gist of the case is that if the invoices issued by the assessee has separately shown the value of the goods used and the service charges in respect of the supply of consumables used in providing service, and VAT is also paid on sale of such consumables, then service tax would only be levied only on the service/labour component. Therefore, the assessee is not required to pay service tax on the gross amount charged as it includes the value of goods also.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2015-16/2779

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