Valuation of servicing charges excludes separately sold spare parts taxed as goods, with fresh adjudication ordered.

Amounts attributable to spare parts sold separately during vehicle servicing, on which Sales Tax/VAT was discharged and which were shown distinctly in invoices, were not to be automatically included in the taxable service value for service tax. The Tribunal treated the issue as covered by earlier decisions and by the circular dated 23.08.2007, which recognised that a component taxed as a sale of goods does not form part of the service tax base on that component. Because the adjudicating authority had not properly examined the appellant's contention and supporting material, the matter was remanded for fresh adjudication.

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Issues: Whether the cost of spare parts sold during servicing of vehicles could be included in the value of the taxable service for levy of service tax.

Analysis: The dispute turned on whether amounts attributable to spare parts, on which Sales Tax/VAT had been discharged and which were separately reflected in the invoices, formed part of the service tax base. The Tribunal noted that the matter was identical to earlier decisions where the cost of spare parts sold during rendering of service was held not to form part of the transaction value. The Board's circular dated 23.08.2007 also supported the view that a transaction treated as sale of goods and subjected to VAT is not liable to service tax on that component. As the adjudicating authority had not properly examined the appellant's contention and supporting material, a fresh consideration was necessary.

Conclusion: The cost of spare parts sold during servicing could not be straightaway included in the value of the taxable service, and the matter was remanded for fresh adjudication on the appellant's claim.

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