2019 (10) TMI 689 - AT - Service Tax

Tribunal rules in favor of appellant, rejecting service tax on material cost reimbursement

The Tribunal ruled in favor of the appellant, setting aside the Ld. Commissioner's order. Citing legal precedent and a Supreme Court judgment, it held ... Refund of Service tax - inclusion of cost of goods and materials supplied in assessable value - Rule 5 (1) of Service Tax (Determination of Value) Rules, 2006 - HELD THAT:- On identical set of facts for the earlier period, this Tribunal in the case of M/S. COIMBATORE ANAMALLAIS AGENCIES PVT. LTD., COIMBATORE VERSUS THE COMMISSIONER OF G.S.T. & CENTRAL EXCISE, COIMBATORE [2019 (1) TMI 437 - CESTAT CHENNAI] has allowed the appeal, holding that cost of material reimbursed by the manufacturer cannot be subjected to levy of service tax under the provisions of Section 67 of the Finance Act, 1994. In view of the fact that on the identical facts, for the previous period, appeal of the appellant has already been allowed by the Tribunal, we do not find any justifiable reason to accept the prayer of Revenue in support of confirmation of the adjudged demand, especially in view of the fact that the issue arising out of the present dispute is no more open for any debate. Appeal allowed - decided in favor of appellant. Issues:Service tax liability on material cost reimbursed by the manufacturer.Analysis:The appellant, engaged in the sale and service/repair of light motor vehicles, faced a service tax dispute regarding the reimbursement of material cost by the manufacturer. The department contended that the material cost should be included in the gross value for service tax calculation. Show cause proceedings resulted in a demand of Rs. 3,30,969 along with penalties. The appellant appealed against the adjudication order, which was upheld by the Ld. Commissioner. The appellant, citing a previous Tribunal order and the Supreme Court judgment in the case of Union of India Vs Intercontinental Consultants and Technocrafts Pvt. Ltd., argued that the material cost reimbursement should not attract service tax under Section 67 of the Finance Act, 1994.The Tribunal noted that in the appellant's previous case for the same issue, the appeal was allowed based on the Supreme Court judgment mentioned earlier. Given the precedent and legal clarity, the Tribunal found no justification to uphold the Revenue's position. The Tribunal emphasized that the issue was settled by the Supreme Court's judgment and the appellant's previous successful appeal. Consequently, the impugned order of the Ld. Commissioner was deemed meritless, and the appeal was allowed in favor of the appellant.In conclusion, the Tribunal ruled in favor of the appellant, setting aside the impugned order of the Ld. Commissioner. The decision was based on the established legal precedent and the Supreme Court judgment, which clarified that the material cost reimbursement from the manufacturer should not be subject to service tax liability.