Tyre retreading material cost deductible under Notification No. 12/2003-ST; service tax demand on that basis failed.

In tyre retreading service, the Tribunal applied binding Supreme Court precedent and held that the value of materials used in the retreading process was deductible under Notification No. 12/2003-ST. As a result, that material cost could not be fully included in the service tax base as proposed by the department, and the demand founded on denial of the notification benefit was unsustainable. The assessee was therefore entitled to the notification benefit for material cost, and the Revenue's challenge failed.

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Issues: Whether, in tyre retreading service, the value of materials used in the retreading process was deductible under Notification No. 12/2003-ST so as to exclude that portion from the service tax demand.

Analysis: The Tribunal noted that the issue was already settled by the Supreme Court in the context of tyre retreading service. Applying that binding decision, it held that the cost of materials used in providing the service could not be subjected to service tax in the manner proposed by the department. The demand founded on denial of the notification benefit was therefore unsustainable.

Conclusion: The demand was set aside in favour of the assessee and the departmental appeals were dismissed.

Final Conclusion: The common order affirmed the assessee's entitlement to the notification benefit for material cost in tyre retreading service and rejected the Revenue's challenge.

Ratio Decidendi: In tyre retreading service, the value of materials used in providing the service is deductible under Notification No. 12/2003-ST and cannot be fully included in the service tax base when the binding precedent so holds.

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