Taxable service valuation includes inseparable component repair costs; deliberate exclusion can justify extended limitation and penalty.

The cost of rewinding a stator used to complete compressor repair was treated as part of the consideration for the taxable repair service and therefore includible in the service value. The exclusion of that cost was found to be a clear valuation lapse, not a bona fide dispute, and was treated as indicative of intent to evade tax. On that basis, extended limitation and penalty were justified. The order confirming tax liability and penalty was sustained, and the appeal was dismissed.

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Issues: (i) Whether the cost of rewinding the stator was includible in the taxable value of the compressor repair service; (ii) Whether invocation of the extended period of limitation and imposition of penalty were justified.

Issue (i): Whether the cost of rewinding the stator was includible in the taxable value of the compressor repair service.

Analysis: The repaired stator was used for completing the compressor repair and was treated as an input for rendering the output service. The cost incurred for such stator repair was therefore not a separate charge outside the service value but formed part of the consideration for the repair service.

Conclusion: The cost of rewinding the stator was rightly includible in the taxable value, against the assessee.

Issue (ii): Whether invocation of the extended period of limitation and imposition of penalty were justified.

Analysis: The valuation issue was held to be clear and not one that could reasonably create doubt. Non-inclusion of the stator repair cost was found to be with intent to evade payment of tax, justifying both extended limitation and penalty.

Conclusion: Invocation of the extended period and imposition of penalty were justified, against the assessee.

Final Conclusion: The order confirming tax liability and penalty was sustained, and the appeal was dismissed.

Ratio Decidendi: Where a component repair is inseparably used in completing the taxable repair service, its cost forms part of the taxable value, and deliberate exclusion of such cost warrants extended limitation and penalty.

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