2024 (11) TMI 993 - AT - Service Tax

Car dealer wins challenge against service tax demand on handling charges included in vehicle sale price

CESTAT Ahmedabad ruled in favor of a car dealer challenging service tax demand on handling charges collected from customers. The appellant, a Maruti ... Service tax on handling charges collected by the appellant from their customers of motor vehicle - appellant being a car dealer of Maruti Suzuki Ltd. involved in the selling car on principle to principle basis - appellant submits that the handling charges was collected by the appellant which was subsequently considered as part of the sale price of the car and the appellant have discharged the VAT on such handling charges treating the same as part and parcel of sale price of the car, any amount which is part of the sale of the goods will not attract any service tax. HELD THAT:- We find that this issue is no longer res-integra in as much as in various judgments, it was held that if the handling charges is included in the sale value of the car and VAT was paid then such handling charges being a part and parcel of the sale value will not be exigible to service tax. See Ganga Automobiles [2023 (10) TMI 355 - CESTAT AHMEDABAD] It is not in dispute that once the handling charges is part and parcel of the sale price of car and sales tax/VAT thereon has been paid, the same became a part and parcel of the sale value hence will not attract any service tax. Thus the service tax demand on the handling charges collected during the sale of the car as sale price of the car cannot be levied with service tax. Whether the handling charges is a part and parcel of the sale value of the goods and VAT was paid? - From the VAT assessment order, it is clear that the handling charges and warranty amount which was not earlier included in the sale value was included for the purpose of VAT assessment and VAT has been paid and thereafter, no VAT amount tax remains to be paid. With the above it is clear that the appellant have paid the VAT amount on the handling charges. Therefore, the above judgments which are on the facts that the handling charges is a part and parcel of the sale value and the same was suffered the VAT tax, directly applies in the facts of the present case as discussed above. AR raised point that this VAT assessment order were not presented before the lower authority. Therefore, the same cannot be considered at this stage. In this regard, we are of the view that as per the settled legal position this Tribunal is a final fact finding authority, therefore, considering the VAT assessment order, the demand of service tax is not incorrect. Therefore, the objection of Ld. AR cannot be sustained. Issues Involved:1. Whether handling charges collected by the appellant from their customers are considered a provision of service and liable to service tax.2. Whether the demand for an extended period is sustainable.3. Whether the demand towards interest and penalty is sustainable.Detailed Analysis:1. Handling Charges and Service Tax Liability:The primary issue in this case was whether handling charges collected by the appellant, a car dealer, from their customers should be considered a provision of service and thus liable to service tax. The appellant argued that the handling charges were part of the sale price of the car and had already been subjected to VAT, thus exempting them from service tax. The appellant supported this argument by referencing sales invoices and proceedings from the commercial tax department, which confirmed that handling charges were part of the sale price, attracting VAT. The appellant cited several judgments to assert that once VAT is paid on an amount, it cannot be subjected to service tax.The tribunal reviewed these arguments and found that the issue was not res-integra, as prior judgments had established that if handling charges are included in the sale value of the car and VAT is paid, they are not subject to service tax. The tribunal cited the case of C.C.E. & S.T.-Surat-I vs. Ganga Automobiles, where it was clarified that transactions treated as sales and subjected to VAT do not attract service tax. The tribunal concluded that handling charges, being part of the sale value on which VAT was paid, are not liable for service tax.2. Demand for Extended Period:The appellant contended that the demand for an extended period was not sustainable because the handling charges were declared in the sales invoice, indicating no suppression of fact. The appellant relied on various judgments, including Cosmic Dye Chemical Vs. Collector of Central Excise, to argue that when facts are declared, the extended period for demand is not applicable. The tribunal agreed with this position, as the handling charges were disclosed in the invoices, negating any allegation of suppression.3. Demand Towards Interest and Penalty:The appellant argued that since the demand itself was not sustainable, the associated demand for interest and penalties should also not be sustained. Given the tribunal's finding that the handling charges were part of the sale price and not liable for service tax, the rationale for interest and penalties was undermined. The tribunal, therefore, found that the demand for interest and penalties was not justified.Conclusion:The tribunal set aside the impugned orders, ruling that the service tax demand on handling charges collected during the sale of cars could not be levied. The appeal was allowed, providing consequential relief to the appellant. The tribunal's decision was based on the established legal principle that once VAT is paid on an amount considered part of the sale value, service tax cannot be demanded on the same amount.