Composite transaction tax treatment led to waiver of pre-deposit and stay of recovery pending appeal.

Pre-deposit of tax, interest and penalty on the value of parts replaced during free servicing was waived and recovery stayed pending the appeals. The tribunal treated the replacement of parts as prima facie distinct from the service element and held that the material component in a composite transaction could be examined separately for tax purposes. Relying on this prima facie view and supporting precedents, it protected the demand during the pendency of the appeals, leaving the merits to be decided later.

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Issues: Whether pre-deposit of the tax, interest and penalty demanded on the value of parts replaced during free servicing was to be waived and recovery stayed during pendency of the appeals.

Analysis: The dispute was at the stage of stay and waiver. The replacement of parts during vehicle servicing was treated as prima facie distinct from the service element, and the transaction relating to materials was considered separately discernible. The order also noted the principle that in a composite transaction involving both supply of material and provision of service, the respective taxing authorities can tax only the aspect falling within their legislative competence. In the light of the prima facie view and the precedents relied upon, the demand required protection pending disposal of the appeals.

Conclusion: Pre-deposit was waived and recovery of the dues was stayed during pendency of the appeals.

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