2023 (8) TMI 1235 - AT - Service Tax

Tribunal rules in favor of Appellant, setting aside service tax demand on spare parts sold during vehicle servicing.

M/s Fast Track Auto Care (India) Pvt. Ltd., Mr. P.C. Suman, Director, Mr. Devendra Pal Singh, Director Versus Commissioner of Central Goods & Services Tax, Noida

The Tribunal ruled in favor of the Appellant, setting aside the service tax demand on spare parts sold during vehicle servicing. Citing precedent, the ... Demand of Service Tax - value of material/spare parts sold by the Appellant during servicing of motor vehicles - Appellant has already deposited under the provisions of Uttar Pradesh Value Added Tax, 2008 on the value of such materials sold by them during servicing of motor vehicles - reverse charge mechanism - HELD THAT:- The issue is no more res integra as the same stands settled by the order of another Division Bench of this in the case of M/S. SAMTECH INDUSTRIES AND OTHERS VERSUS CCE. KANPUR AND OTHERS [2014 (4) TMI 995 - CESTAT NEW DELHI], wherein the assessee was providing the service of repairing transformer and was using consumables like transformer oil and also component parts being coil etc., the Tribunal held, in view of the fact that it is not disputed that in respect of the supply of goods, used for providing of service of repair, Sales Tax/VAT is paid, which fact is evident from the invoice on record. It was also observed that when the value of goods used is shown separately in the invoice and on the same Sales Tax/VAT has been paid, the supply of the goods would have to be treated as sale and the transaction which are sale cannot be a part of the service transaction. Accordingly, Service Tax is chargeable only on the services/labour charges and the value of the goods thereunder would not be includible in the assessable value. The demand of service tax against the Appellant for the cost of the goods supplied during repair/service does not appear to be sustainable. Accordingly, the demand, interest and the penalties imposed are set aside. Penalties under section 78 A of the Act upon Shri Devendra Pal Singh and Shri P. C. Suman, both directors of the Appellant company - HELD THAT:- On facts and under the circumstances of the case, ingredients to impose penalty under section 78 A of the Act does not exist. We therefore, propose to drop the penalty imposed under section 78 A on Shri Devendra Pal Singh and Shri P. C. Suman - penalty dropped. Appeal allowed. Issues:The case involved a dispute regarding the demand of service tax on the value of spare parts sold during the servicing of motor vehicles by the Appellant. The Appellant contested the demand, arguing that they had already paid Uttar Pradesh Value Added Tax on the materials sold. Additionally, penalties were imposed on the directors of the Appellant company under section 78 A of the Act for allegedly aiding in the evasion of service tax.Service Tax Demand on Spare Parts:The Appellant argued that the service tax demanded on spare parts sold during servicing of motor vehicles was unjustified as they had already paid VAT on the materials. The Chartered Accountant representing the Appellant pointed out that VAT had been charged on the material used during servicing, while service tax was charged on labor charges. The Appellant relied on a previous Tribunal decision to support their contention.Legal Precedents and Rulings:The Tribunal referred to a previous case involving Samtech Industries, where it was established that if VAT had been paid on goods separately shown in the invoice, service tax should not be charged on the same goods. The Tribunal also noted that the Central Board of Excise and Customs had accepted this legal position. Based on these precedents, the Tribunal concluded that the demand for service tax on goods supplied during repair/service by the Appellant was not sustainable.Penalties Imposed on Directors:Penalties were imposed on the directors of the Appellant company under section 78 A for allegedly aiding in the evasion of service tax. However, the Tribunal found that since the demand against the company was deemed unsustainable, the penalties on the directors could only be upheld if they were knowingly involved in the evasion. As the necessary ingredients for imposing penalties under section 78 A were not met, the Tribunal decided to drop the penalties imposed on the directors.Decision:The Tribunal set aside the demand for service tax on the Appellant company and the associated penalties under section 78. Additionally, the penalties imposed on the directors of the company were also set aside. The appeals filed by the Appellants were allowed, providing them with consequential relief as per the law.