Applicability of Service Tax on repairing of defective compressors

[Guest]

Whether the Dealer of Kirloskar Compressor who takes defective compressors from customers and supply the same to Kirloskar for repairing the same is liable for service tax. whether the dealer is liable ??

[Surender Gupta]

This issue can be decided on facts and circumstances. Who is responsible to repair, who is receiving money, whether it is under warranty or not and like other issues to be looked into.

[Brijesh Verma]

This is a case where one needs to keep a close look at various aspects of the services being rendered by the captioned 'Dealer'. Firstly, Section 65(64) of the Finance Act 1994 deals with the 'Maintainence or repair services'. These services are of a wide import and also cover those persons (even not being manufacturer), who provide any service 'in relation to'Maintainence or repair. The words 'in relation to' is of paramount importance in this regard. Secondly, the services provided by the captioned dealer are undoubtedely performed 'in relation to' the Maintainence or repair of the customers goods. It would not be important whether the actual repair/ maintainence is performed by the dealer or not. Thirdly, tax would be liable to be paid if and only if the captioned dealer charges any amount for such activity. It is thus imperative to take a keen look at the facts of the case, the arrangement of the dealer with the Company and other such instrumentalities.

[Guest]

In my Opinion ,since the dealer has taken back the Defective Compresssors from the customers and supply the same to Kirloskars for repairing thus removing the defect which is present at the time of sale of compressors,as you have mentioned that the compressors are defective one,thus theres seem to be no extra service in the compressor thus no service tax is liable on the dealer

AI Summary

Maintenance or repair services: dealer may attract service tax if charging for arranging repairs of defective goods. Liability for service tax depends on whether the dealer's activity constitutes Maintenance or repair services performed 'in relation to' repair and whether the dealer receives consideration. The statutory scope covers persons who arrange or provide services connected to repair even if the actual work is done by the manufacturer. The question is fact-specific: responsibility for repair, the payment flow, and whether the work is under warranty determine taxable liability; absence of separate consideration for warranty repairs suggests no service tax on the dealer.