Appeal dismissed: No service tax on reimbursed free services during warranty period

The Tribunal dismissed the appeal filed by the Revenue, ruling that the demand for service tax on the reimbursed amount for free services provided during the warranty period was not sustainable. The Tribunal emphasized that the liability to service tax arises from services provided to customers, not from reimbursements, and noted that the free services were part of the dealers' functions without any reimbursement from the manufacturer. The order of the Commissioner was set aside, and consequential relief was granted in accordance with the law.

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Issues involved:
The appeal was filed against an order passed by the Commissioner of Central Excise, Cochin, regarding the chargeability of service tax on the amount reimbursed to the appellant for providing free services during the warranty period for Hyundai cars.

Summary of Judgment:

Issue 1: Chargeability of service tax on reimbursed amount for free services
The appellants, authorized dealers for Hyundai cars, provided free services during the warranty period. The Tribunal found that the demand notice for service tax was misconceived as the free services provided to customers did not involve any charges. The Tribunal referred to previous cases and held that the liability to service tax arises from services provided to customers, not from reimbursements. It was noted that the free services were part of the dealers' functions, and no reimbursement was made by the manufacturer. The Tribunal dismissed the appeal filed by the Revenue, citing that the demand for service tax was not sustainable based on the facts presented.

Issue 2: Interpretation of dealership agreement clauses
The Tribunal analyzed the dealership agreement clauses related to free services and reimbursement rates. It was highlighted that the clause concerning free warranty services did not mention any reimbursement, and the demand for service tax was based on a clause unrelated to free warranty. The Tribunal emphasized that the free services provided to car buyers were not reimbursed by the manufacturer, and the demand for service tax was deemed misconceived. Previous judgments were cited to support the view that no service tax could be levied on the amount representing the dealers' margin, which had already been taxed as part of the sale value of the cars.

Conclusion:
The Tribunal allowed the appeal, following the precedent set in previous judgments and dismissing the demand for service tax on the reimbursed amount for free services provided during the warranty period. The order of the Commissioner was set aside, and consequential relief was granted in accordance with the law.

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