2025 (1) TMI 77 - AT - Service Tax

Car dealer's handling charges in vehicle sale invoices exempt from service tax when VAT already paid

CARGO MOTORS GUJ PVT LTD AND SHRI TUSHAR GHAI Versus C.C.E. & S.T. -VADODARA-I

CESTAT Ahmedabad held that a car dealer's handling charges included in vehicle sale invoices are not liable for service tax. The appellant collected ... Liability of appellant to pay service tax - appellant is a car dealer collecting handling charges in their sale bill of selling of car to individual customer - HELD THAT:- In the facts of the present case there is no dispute that the handling charges is shown in the sale bill of the car and on the total elements that is sale price of the car, handling charges and other charges, the appellant have calculated the VAT at the rate of 12.5%+2.5% and the total bill value was collected from the customer of the car, Therefore the total bill value is a sale value of the car and the handling charges is part of the sale price on which the VAT has been paid. Therefore the handling charges being the part of the sale price the same again cannot be subject to levy of service tax. From the decision in JIVAN JYOT MOTORS PVT LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE & ST, SURAT [2023 (7) TMI 1178 - CESTAT AHMEDABAD] it can be seen that the issue in hand is squarely covered by the decision. Therefore the handling charges is not liable to service tax. In the present case there is no dispute from the VAT department that the handling charges whether is liable to VAT or otherwise. Since the appellant has charged the VAT on handling charges and the same attained finality as there is no record whether the charging of VAT is incorrect the handling charges in the fact of the present case cannot be charged to service tax. Conclusion - The handling charges included in the sale invoice of the car, on which VAT was paid, are not liable for service tax. The impugned order is set aside. Appeal is allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal question in this case is whether the appellant, a car dealer, is liable to pay service tax on handling charges collected in the sale bill of a car, or if these charges are part of the sale price subject to VAT and thus exempt from service tax.2. ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents:The appellant argues that the handling charges are part of the sale value of the car, on which VAT has been paid, and therefore should not be subject to service tax. They cite several precedents, including decisions from the Supreme Court and various Tribunals, which support the view that if VAT is paid on the total sale value, no service tax can be levied on any part of that value.The respondent, representing the revenue, contends that handling charges are independently taxable as a service. They rely on a decision by the Bombay High Court, which held that handling charges not forming part of the sale price are liable for service tax.Court's interpretation and reasoning:The Tribunal considered the fact that the handling charges were included in the sale invoice of the car and that VAT was paid on the total amount, including these charges. The Tribunal referenced the Supreme Court's decision in CST v. UFO Moviez India Limited, which established that when VAT is paid on the sale of goods, service tax cannot be claimed on the same amount.Key evidence and findings:The Tribunal examined the sale invoices, confirming that handling charges were included in the sale price and VAT was duly paid. The evidence showed that the charges were not separately billed, which was a critical factor in distinguishing this case from the precedent cited by the revenue.Application of law to facts:The Tribunal applied the principle that if VAT is paid on the total sale value, including handling charges, then service tax cannot be levied on those charges. This application was consistent with the legal precedents cited by the appellant.Treatment of competing arguments:The Tribunal rejected the revenue's reliance on the Bombay High Court's decision, noting the factual difference that in the cited case, handling charges were billed separately, whereas in the present case, they were part of the sale invoice. The Tribunal emphasized that the VAT department did not dispute the VAT payment on handling charges, reinforcing the appellant's position.Conclusions:The Tribunal concluded that handling charges, being part of the sale price on which VAT was paid, are not subject to service tax. The appeal was allowed, and the impugned order was set aside.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning:'From the principle laid-down by Hon'ble Supreme Court in the above decision, it is settled that when VAT has been paid on the sale of goods, the question to claim service tax thereon does not arise.'Core principles established:The judgment reinforces the principle that when VAT is paid on the total sale value, including handling charges, no service tax can be levied on those charges. This principle aligns with the broader legal framework that distinguishes between the sale of goods and the provision of services.Final determinations on each issue:The Tribunal determined that the handling charges included in the sale invoice of the car, on which VAT was paid, are not liable for service tax. The appeal was allowed, and the previous order demanding service tax on handling charges was set aside.The Tribunal's decision underscores the importance of how charges are billed and taxed, emphasizing that the inclusion of charges in the sale invoice and the payment of VAT are critical factors in determining service tax liability.