Free warranty retention is not taxable service consideration where no separate maintenance fee is received.

Amounts retained by a seller only to secure performance of a two-year free warranty obligation were not consideration for taxable Management, Maintenance and Repair Service. The televisions were sold on terms that included warranty support after sale, but no separate payment was received for maintenance or repair services. In the absence of any receipt attributable to the alleged service, the retained sum could not be treated as taxable consideration, so service tax was not payable on that amount and the demand was unsustainable.

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Issues: Whether the amount retained by the buyer towards two years' free warranty service formed consideration for taxable Management, Maintenance and Repair Service and attracted service tax.

Analysis: The price of the televisions was agreed to include free warranty obligations for two years after sale. The amount of Rs. 150 per television was retained to secure performance of that warranty obligation, but no separate consideration was received by the appellant for providing maintenance or repair services. In the absence of receipt of any amount towards the alleged service, the retained sum could not be treated as consideration for a taxable service.

Conclusion: The retained amount was not liable to service tax, and the demand was unsustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Service tax is not payable on an amount retained only to secure free warranty obligations when no separate consideration is received for the alleged taxable service.

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