Service tax only on service/labour component, not goods used in repair charges for transformers.

The Allahabad High Court dismissed the appeal, finding that service tax should only be levied on the service/labour component of repair charges for transformers when the value of goods used is separately shown in the invoices. The Court relied on a previous decision and held that when consumables like transformer oil and component parts are itemized in the invoices with sales tax or VAT paid on them, service tax is not applicable to the value of goods used for repair. The appeal was dismissed, and no costs were awarded.

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Issues:
- Interpretation of Notification No. 12/2003 S.T. dated 20.06.2013 regarding abatement of cost of material replaced for repair of transformer
- Liability to pay service tax on gross amount charged in the repair of transformers including consumables like transformer oil and component parts
- Applicability of service tax on the service/labour component only when the value of goods used is shown separately in the invoices

Analysis:

The appeal before the Allahabad High Court stemmed from a Customs, Excise and Services Tax Appellate Tribunal order dated 26 February 2014. The primary question of law raised by the revenue was whether abatement of the cost of material replaced for repair of a transformer under Notification No. 12/2003 S.T. dated 20.06.2013 should be granted to the respondent or if service tax is leviable on the gross value of bill charges from customers as per Section 67 of the Finance Act, 1994.

The Tribunal deliberated on the issue of whether the assessee was obligated to pay service tax on the total amount charged for repairing transformers, which included the value of consumables like transformer oil and component parts. Notably, the Tribunal noted that the invoices issued by the assessee distinctly separated the value of goods used, such as transformer oil and service charges, with sales tax or VAT being paid on the consumables supplied for repair services. In light of this factual scenario, the Tribunal concluded that when the value of goods used was itemized separately in the invoices with applicable sales tax or VAT, the service tax would be applicable solely on the service/labour component, excluding the value of goods utilized for repair from the assessable service value.

The counsel representing the revenue brought to the Court's attention a prior decision of the same Court in Commissioner, Customs and Central Excise Vs. Balaji Tirupati Enterprises, where a similar issue was decided against the revenue. Acknowledging the undisputed factual position as per the Tribunal's order and the precedent set by the earlier judgment in Balaji Tirupati Enterprises, the Court determined that the appeal did not raise any substantial question of law. Consequently, the appeal was dismissed, and no costs were awarded in the matter.

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