2019 (1) TMI 1248 - HC - Service Tax

High Court sets aside service tax order, emphasizes tax on service component only, remits for reconsideration.

M/s Tyresoles (India) Pvt. Ltd., Versus The Union of India, The Ministry of Finance Government of India, The Commissioner of Central Excise & Service Tax

The High Court partially allowed the writ petition, setting aside the Original Authority's order on service tax for re-treading of tyres. The Court ... Liability of service tax - whether in a contract for re-treading of tyres, service tax is leviable on the total amount charged for re-treading including the value of the materials/goods that have been used and sold in the execution of the contract? - Held that:- The Hon’ble Apex Court in SAFETY RETREADING COMPANY (P) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, SALEM, M/S TYRESOLES INDIA PRIVATE LMITED VERSUS THE COMMISSIONER OF CENTRAL EXCISE, GOA AND M/S LAXMI TYRES VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE [2017 (1) TMI 1110 - SUPREME COURT] has upheld the service component at 30% and has held that it is the service component comprising of 30%, which is exigible - In that view of the matter, the order in Original case has been passed without noticing the law laid down by the Hon’ble Apex Court and in the considered opinion of this Court it is not sustainable and the Original Authority is required to pass appropriate orders after taking into consideration the law laid down by the Hon’ble Apex Court - the writ petition is partly allowed. Matter is remitted back to the Original Authority for reconsideration - appeal allowed by way of remand. Issues:1. Interpretation of service tax on re-treading of tyres.2. Application of Rule 5 of the Service Tax (Determination of Value) Rules, 2006.3. Compliance with the law laid down by the Hon'ble Apex Court.4. Review of the order passed by the Original Authority.Analysis:1. The High Court considered the issue of service tax on re-treading of tyres, specifically whether service tax is leviable on the total amount charged for re-treading, including the value of materials used. The Hon'ble Apex Court had previously determined that service tax should apply only to the service component, set at 30%.2. The Original Authority had ordered the petitioner to pay service tax on the entire sum charged for re-treading, including the value of inputs and consumables. The Court noted that this decision did not align with the law laid down by the Hon'ble Apex Court, which clarified that service tax should only apply to the service component, not the entire sum.3. The Hon'ble Apex Court emphasized the importance of adequate proof regarding the value of goods or parts sold to the customer in relation to the service component subject to tax. The Court highlighted that the Original Authority's decision failed to consider the 30% service component as established by the Hon'ble Apex Court, leading to the order being set aside for reconsideration.4. Consequently, the High Court partially allowed the writ petition, setting aside the Original Authority's order and remitting the matter back for reconsideration in light of the Hon'ble Apex Court's directives. The petitioner was directed to appear before the Original Authority and submit any necessary documents by a specified date, with the Authority instructed to review the submissions within four weeks.In conclusion, the High Court's judgment focused on ensuring compliance with the legal principles established by the Hon'ble Apex Court regarding the application of service tax on re-treading services, emphasizing the need to consider the service component separately from the value of materials used.