Dealer margin in vehicle sales not liable to service tax when already taxed as sale value and free servicing is only incidental.

Service tax could not be levied on a dealer's margin where the margin formed part of the vehicle sale value and had already suffered sales tax. The dominant transaction was the sale of goods, and the free servicing offered was only incidental to promote sales, not a separate taxable service. On that basis, the same amount could not be subjected to service tax again merely because no separate charge was raised for servicing. The demand was therefore unsustainable and was set aside in favour of the assessee.

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Issues: Whether service tax was leviable on the dealer's margin received on sale of vehicles, where the margin was already subjected to sales tax and the free servicing was incidental to the sale.

Analysis: The demand was found to relate to the dealer's margin forming part of the sale value of the vehicles, and that amount had already suffered sales tax. The reasoning adopted was that the dominant transaction was the sale of goods, while the provision of free servicing was only incidental and intended to promote sales. On that basis, the amount representing the dealer's margin could not again be subjected to service tax merely because free services were rendered without separate charges.

Conclusion: The service tax demand on the dealer's margin was not sustainable and the demand was set aside in favour of the assessee.

Ratio Decidendi: Where an amount forms part of the sale value of goods and has already been subjected to sales tax, no service tax can be levied on the same amount merely because the seller renders incidental free servicing in connection with the sale.

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