No Service Tax to be levied on fitment and preparation of scalp to make Wig

The Hon’ble High Court of Madras in the matter ofWHITE CLIFFS HAIR STUDIO PRIVATE LTD. VERSUS ADDITIONAL COMMISSIONER, OFFICE OF THE PRINCIPAL COMMISSIONER OF CGST AND CENTRAL EXCISE - 2022 (8) TMI 105 - MADRAS HIGH COURT set aside the order passed by the Revenue Department and held that no Service Tax to be levied on incidental services including fitment of the wig and the preparation of the scalp to receive the wig.

Facts:

M/s White Cliffs Hair Studio Private Ltd (“the Petitioner”) has engaged in Non-surgical Hair Replacement for persons who have suffered hair loss and for the purpose, the manufactured wig is fitted by measuring the head, then test the skin for endurance and an option is given to colour the wig if desired. Accordingly, the head is prepared by shaving and cleaning, and oil is applied to the scalp to rid it of dryness. The wig is thereafter pasted onto the head with medical tape and glue.

On the aforesaid facts, the legal issue that arises is whether the intrinsic or dominant nature of the transaction is one of sale of a wig or rendition of service.

The Revenue Department (“the Respondent”) vide Order-In-Original (“the OIO”) concludes that the above said services attract Service Tax as the activity would fall squarely within the definition of service under Section 65B(44) of the Finance Act, 1994 (“the Finance Act”) effective from July 01, 2012. The definition of service thereunder is an inclusive one, meaning any activity carried out by a person for another for consideration, with certain exceptions. Being Aggrieved by the OIO, present writ petition has been filed.

Issue:

• Whether the activity carried on by the Petitioner in the hair studio, constitutes sale of a product, being a wig, or service of preparation of wig and fitment thereof?

Held:

The Hon’ble High Court of Madras in WHITE CLIFFS HAIR STUDIO PRIVATE LTD. VERSUS ADDITIONAL COMMISSIONER, OFFICE OF THE PRINCIPAL COMMISSIONER OF CGST AND CENTRAL EXCISE - 2022 (8) TMI 105 - MADRAS HIGH COURThas held as under:

• Relied upon the judgement of Hon’ble Supreme Court in the case of IMAGIC CREATIVE PVT. LTD. VERSUS COMMISSIONER OF COMMERCIAL TAXES & ORS.- 2008 (1) TMI 2 - SUPREME COURT wherein it was held that the difference between a composite contract and an indivisible one.  A composite contract is one that would involve components of sale and service whereas an indivisible contract, also involving components of sale and service, is one where the distinction between the two is very fine and difficult to determine.
• Stated that, without question the integral component of the transaction in the present case is the wig itself, as without the wig, there would be no transaction per se. The fitment of the wig and the preparation of the scalp to receive the wig is, incidental to the product itself.
• Noted that a client could well purchase a wig without opting for the service of fitment or maintenance. The services of preparation of the scalp, fitment as well as maintenance of the wig, are merely to facilitate an aid in the utilization of the product and would have no relevance in the absence of the wig.

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