2007 (9) TMI 194 - AT - Service Tax

Tribunal Rules Service Tax Not Applicable to Free Car Services

The Tribunal set aside the impugned order and allowed the appeal, following the precedent that Service Tax is not applicable to free services provided by ... Service Tax leviability on free services - Authorized Service Station - Reimbursement as consideration - Demand based on assumption and absence of evidenceService Tax leviability on free services - Reimbursement as consideration - Authorized Service Station - Whether service tax is leviable on free services rendered by an authorised service station in respect of cars sold through its agencies when no reimbursement is shown to have been received. - HELD THAT: - The Tribunal examined the Revenue's contention that the appellants received reimbursement for free services and therefore service tax was payable. The Bench relied on its earlier Final Order in M/s. Indus Motor Company v. CCE, Cochin (Final Order No. 928 & 929/2007 dated 9-8-2007), which held that demands premised on an assumption that the cost of free services is hidden in the vehicle price cannot be sustained where Revenue adduces no evidence of reimbursement. The Tribunal noted the Ministry's circular clarifying that service tax is not required to be discharged by dealers who have sold vehicles through their agencies and rendered free service, and observed that the appellants had not received any reimbursement for the free services in question. Applying the cited ratio, the Tribunal concluded that, absent proof of reimbursement or other consideration, the demand for service tax on the free services could not be confirmed. [Paras 4]Impugned order set aside; appeal allowed with consequential relief, the demand of service tax on the free services quashed in the absence of evidence of reimbursement.Final Conclusion: Following the Tribunal's earlier precedent and in the absence of any evidence that the appellants received reimbursement for the free services, the demand of service tax was quashed and the appeal allowed with consequential relief. Issues:Service Tax on free service of cars by authorized service stations.Analysis:The appeal in this case arose from an Order-in-Appeal confirming Service Tax on the appellants for providing free service of cars under the category of 'Authorized Service Station' for cars sold through their agencies. The Revenue contended that since the appellants received reimbursement for the services, Service Tax was leviable. However, the appellants argued that previous Commissionerates had dropped similar proceedings, and a previous Tribunal order had held that Service Tax is not applicable to free services provided by the assessee. The learned DR cited a Ministry circular stating that dealers selling vehicles through agencies and providing free service are not required to discharge Service Tax.The appellants clarified that they did not receive any reimbursement for the free services provided by them in relation to the cars sold by them. They had discharged Service Tax for reimbursements received for free services of cars sold by other dealers. The Tribunal referred to a previous case where it was noted that unless evidence of reimbursement is shown, demands for Service Tax on free services are based on assumptions and presumptions. The Tribunal found no merit in the impugned orders and allowed the appeal based on the precedent that Service Tax is not leviable for free services provided by authorized agencies for cars sold by them.In conclusion, the Tribunal set aside the impugned order and allowed the appeal, following the precedent that Service Tax is not applicable to free services provided by authorized agencies for cars sold by them.