Separate invoicing and VAT on spare parts exclude goods value from service tax on motor vehicle repair services.

Where spare parts, consumables and lubricants used in motor vehicle repair were separately invoiced and subjected to VAT, their value could not be included in the assessable value for service tax. The taxable base was confined to the labour and service component because the goods component was treated as a sale, not part of the service value. On that reasoning, the service tax demand on the goods value was unsustainable, and the associated penalty could not survive. The impugned order was set aside and the appeal allowed with consequential relief.

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Issues: Whether the value of spare parts, consumables and lubricants separately shown in invoices and subjected to VAT could be included in the assessable value for levy of service tax on repair and servicing of motor vehicles, and whether the demand and penalties were sustainable.

Analysis: The invoices showed separate charging of labour/service elements and the value of goods sold, with VAT paid on the latter. The governing legal position, as accepted in the cited precedents and the departmental communication relied upon, was that where the value of goods used in providing the service is specifically indicated and subjected to sales tax/VAT, that component represents a sale and does not form part of the taxable service value. On that basis, the demand for service tax on the cost of spare parts and lubricants was not sustainable, and the consequential penalty demand could not survive.

Conclusion: The demand of service tax on the value of spare parts and lubricants sold separately was set aside, and the appeal was allowed with consequential benefits.

Final Conclusion: The taxable value was confined to the service/labour component, and the goods sold with separate billing and VAT could not be brought into service tax; the impugned order was therefore annulled.

Ratio Decidendi: Where goods used in the course of providing a service are separately identified in the invoice and subjected to VAT or sales tax, their value cannot be included in the assessable value for service tax.

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