Whether Spare parts sold by a service station during servicing of vehicle are liable to ST?

PJ/CASE LAW/2015-16/2965

Case:-SEVA AUTOMOTIVE PVT. LTD. VersusCOMMISSIONER OF C. EX., NAGPUR

Citation:-2015 (37) S.T.R. 747 (Tri. - Mumbai)

Brief Facts:-The appellant, M/s. Seva Automotive Pvt. Ltd. are 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. Accordingly, a show cause notice dated 13-10-2011 was issued to the appellant demanding Service Tax of Rs. 3,55,36,207/- for the period 2006-07 to 2010-11. Interest on the said amount was also demanded and there was also a proposal for imposition of penalty under the provisions of Finance Act, 1994. The cost of spares parts was taken from the balance sheets of the appellants. The notice was adjudicated. The appellant contested that they are not liable to pay Service Tax on the goods sold to the customers and, therefore, inclusion of the same in the value of the taxable service is not sustainable in law. The contention of the appellant was not accepted and demand was confirmed along with interest and by imposing penalty. Aggrieved of the said decision, the appellant is before them.

Appellant’s Contention:-The learned Counsel for the appellant makes the following submissions:-
(i) Service Tax is liable to be discharged on the services rendered. 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.
(ii) Learned Counsel further submits that this Tribunal, in more or less circumstances, in the cases of Ketan Motors Ltd. [2014 (33)S.T.R.165 (T)] vide Order No. A/321/2013/CSTB/C-I, dated 18-2-2013 and Sudarshan Motors - Order No. A/493/2013/CSTB/C-I, dated 25-2-2013 have remanded the matter back to the adjudicating authority for fresh consideration on the ground that the adjudicating authority has not considered the contention of the appellant for exclusion of the cost of the goods sold during the course of the transaction.
(iii) Learned Counsel also relies on the Board’s Master Circular Ref. No. 036.03, dated 23-8-2007, wherein the Board had clarified as follows :-

Issue		Clarification
Whether spare parts sold by a service station during the servicing of vehicles is liable to payment of service tax?		Service Tax is not leviable on a transaction treated as sale of goods and subjected to levy of Sales Tax/VAT.

In the light of the above, Learned Counsel pleads that the stay be granted and the matter be remanded back to the adjudicating authority for fresh consideration.

Respondent’s Contention:- The learned Addl. Commissioner (AR) appearing for the Revenue reiterates the findings of the adjudicating authority.

Reasoning of judgement:-After hearing both the sides, they 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, the 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 23-8-2007 also confirms the above position. Therefore, they 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.

Decision:- Thus, the appeal is allowed by way of remand. The stay application is also disposed of.

Comment:-The crux of the case is that when spare parts are sold by a service station during servicing of vehicle, service tax would be liable only on the amount related to services rendered and not on spare parts sold. Therefore in the present case appeal is allowed on the ground that that cost of spare parts sold cannot be included in value of services rendered.

Submitted By:- Somya Jain

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PJ/CASE LAW/2015-16/2965

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