Tribunal sets aside Commissioner's order on service tax calculation, includes rubber cost, no penalties.

The Tribunal set aside the Commissioner (Appeals) order granting the benefit of Notification No. 12/2003-ST to the respondents in a dispute over the assessable value for service tax calculation in retreading of tyres. The Tribunal found merit in the Revenue's argument that the cost of rubber should be included in the assessable value due to lack of separate invoices for the sale of goods and materials. However, the respondents were not held liable for penalties under Section 80 of the Finance Act, 1994. The appeal was disposed of with the restoration of the adjudicating authority's order.

---

---

Issues:
- Interpretation of Notification No. 12/2003-ST regarding the assessable value for service tax calculation.
- Whether the value of goods and materials used in retreading of tyres should be considered for service tax calculation.
- Applicability of penalties under Section 80 of the Finance Act, 1994.

Analysis:
1. The appeal involved a dispute over the assessable value for service tax calculation in the case of retreading of tyres. The Revenue challenged the order of the Commissioner (Appeals) which allowed the benefit of Notification No. 12/2003-ST to the respondents, excluding the cost of rubber used for retreading from the assessable value.

2. The Revenue contended that the respondents were providing retreading services and charging a gross amount, thus arguing that the cost of rubber should be included in the assessable value for service tax calculation. They emphasized the requirement of documentary proof under Notification No. 12/2003-ST to specifically indicate the value of materials sold.

3. In response, the respondents relied on a Supreme Court decision to argue that retreading of tyres falls under works contract, where the value of goods and materials used should not be considered for service tax calculation. They maintained that the value of materials sold was separately indicated in the invoices, with a percentage allocated to material and labor charges.

4. The Tribunal analyzed the provisions of Notification No. 12/2003-ST and emphasized the requirement of documentary proof to indicate the value of materials sold. Since the respondents did not provide separate invoices for the actual sale of goods and materials, the Tribunal found merit in the Revenue's contention. They cited a previous case where it was held that the benefit of the notification is not available when invoices show deemed sale of materials.

5. Regarding penalties, the Tribunal referred to a previous case involving a difference of opinion, leading to a third member referral. In light of this, the Tribunal concluded that the respondents were not liable for penalties under Section 80 of the Finance Act, 1994.

6. Consequently, the Tribunal set aside the Commissioner (Appeals) order granting the benefit of Notification No. 12/2003-ST to the respondents and restored the order passed by the adjudicating authority. The appeal was disposed of accordingly.

---