Business auxiliary service tax on depot charges requires prior verification of VAT assessment and payment before levy.

Depot and handling charges included in sale invoices attract service tax only after verifying whether VAT has been assessed and discharged on those charges; where VAT is assessed and paid on such ancillary charges they are not exigible to service tax as business auxiliary service. The document directs remittance to the Adjudicating Authority for fresh determination after verification of VAT assessment and returns, sets aside the impugned orders and allows the appeals by way of remand, resulting in a favourable outcome for the assessee contingent on factual VAT verification.

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Issues: (i) Whether depot charges billed and collected by the dealer in the course of sale of motor vehicles are liable to service tax under business auxiliary service.

Analysis: The Tribunal examined whether depot/handling charges charged to customers attract service tax as business auxiliary service. It noted that in prior decisions similar charges were held not exigible to service tax where VAT had been discharged on those charges. In the present proceedings VAT was not discharged before the lower authorities but was subsequently assessed and paid after a VAT demand; that subsequent development was not placed before the Adjudicating Authority or Commissioner (Appeals). The Tribunal found that the factual question of VAT assessment and payment is material to the taxability issue and therefore requires verification by the Adjudicating Authority in light of the VAT assessment and returns.

Conclusion: The matter is remitted to the Adjudicating Authority for fresh decision after verification of VAT payment and assessment; impugned orders are set aside and appeals are allowed by way of remand. The outcome is in favour of the assessee.

Ratio Decidendi: Where ancillary depot/handling charges are included in sale invoices and VAT has been assessed and discharged on those charges, such charges are not exigible to service tax as business auxiliary service; factual verification of VAT assessment is a precondition to determining service tax liability.

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