TaxTMI 
TaxTMI 
2012 (6) TMI 719
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.....6,92,45,440/, during the period 16.6.05 to 31.3.07, together with interest and proposing penal action under the provisions of Sections 76, 77 and 78 of the Finance Act, 1994. The notice was adjudicated by confirmation of the demand raised together with interest and imposition of a penalty of equal amount under Section 78, penalty of Rs. 200/- per day from the date of failure to pay, till the date of payment upto 17.4.06 and 2% of the tax per month or Rs.200/- per day whichever is higher for the tax amount to be paid from 18-4-06 until the date of payment, under Section 76 and Rs. 1000/- under Section 77 of the Finance Act, 1994, rejecting the claim of the assessees to the benefit of deduction of cost of raw materials consumed in providing the service, in terms of Notification No.12/03-ST dt. 20.6.03. Hence this appeal. 2. We have heard both sides. We find that the Commissioner has held that only in case of actual sale of materials, deduction is available under Notification No. 12/2003 and not in case of consumption of raw materials during the course of provision of service. However, we note that in case of Shilpa Color Lab v. CCE [2007] 8 STT 102 (Bang.-Cestat), the Tribunal ex....
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....ted 11-3-2003 and state that in terms of the notification 12/2003-ST dated 20-6-2003, the exemption in respect of input material consumed/sold by the service provider to the service recipient while providing the taxable service is available. However, the exemption is available only if the service provider maintains the records showing the material consumed/sold while providing the taxable service. The value of such material should also be indicated on the bill/invoice issued in respect of the taxable service provided." Thus, the clarification issued by the CBEC made it abundantly clear that the value of the goods consumed while rendering service need not be included in the value of the taxable service. 8.5 This Bench had occasion to deal with this issue when the benefit of deduction was denied on the ground that the value of the goods consumed is not indicated in the invoice in the case of Adlabs v. CCE, Bangalore 2006 (2) S.T.R. 121 (Tri.-Bang.). In the above case, this Bench, made the following observations:- "3. On a careful consideration, we notice that the Commissioner was not justified in taking the view, in contra to the Board's letter and the Notification. The appe....
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.... only that portion of the receipts, which is attributable to the services rendered. While dismissing the petition, the Apex Court made the following observations in para 11. 11. There is one further difficulty in the way of the Petitioner. This Court has, in the case of Rainbow Colour Lab. v. State of M.P. [2000] 2 SCC 385, held that contracts of the type entered into by persons like the Petitioner are nothing else but service contracts pure and simple. It is held that in such contracts there is no element of sale of goods. This Judgment is binding on this Court. In view of this Judgment, the question of directing the Respondent to bifurcate the receipts into an element of goods and the element of service cannot and does not arise. We see no substance in the contention that facts in Rainbow Colour Labs case were different inasmuch as in that case the Court was dealing with a case where photographers take photographs, develop them and then give the photos to the customer. In our view, the ratio of Rainbow Colour Lab's case also applies to cases like the present." 8.8 In the Laxmi Colour (P) Ltd. case, the Tribunal relied on Jidheesh case and held that there is no element of sa....
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....non Dunkerly 1958 (9) STC 353 (SC). Various High Court decisions held that the transactions involving work contracts, hire purchase contracts and catering contracts would not come within the purview of Sales tax and, therefore, the State Governments were not in a position to levy sales tax. In order to solve the problems confronting the states, the issue of the power of States to levy tax on the sale of goods was referred to the Law Commission by the Government of India. The Law Commission suggested three methods. One of the suggestions was inserting in Article 366 a wide definition of "sale" so as to include works contracts. The above suggestion of the Law Commission was accepted by the Government of India. Consequently, the 46th amendment was enacted. Article 366 was, therefore, amended by inserting a definition of "tax on the sale or purchase of goods" in Clause (29A). The same is reproduced below : [(29A) "tax on the sale or purchase of goods" includes, - (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goo....
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....& Co. (Madras) Ltd. [1958] 9 STC 53/AIR 1958 SC 560 the States could not levy sales tax on sale of goods involved in a works contract because the contract was indivisible. All that has happened in law after the 46th Amendment and the judgment of this Court in Builders' case (1989) 2 SCC 645 is that it is now open to the States to divide the works contract into two separate contracts by a legal fiction: (i) contract for sale of goods involved in the said works contract, and (ii) for supply of labour and service. This division of contract under the amended law can be made only if the works contract involved a dominant intention to transfer the property in goods and not in contracts where the transfer in property takes place as an incident of contract of serviceâEUR¦âEUR¦ What is pertinent to ascertain in this connection is what was the dominant intention of the contractâEUR¦âEUR¦ On facts as we have noticed that the work done by the photographer which as held by this Court in STO v. B.C. Kame [1977] 1 SCC 634 is only in the nature of a service contract not involving any sale of goods, we are of the opinion that the stand taken by th....
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....e value of the services to be included in the sale of goods or the price of goods in the value of the service. Presently, what is of interest to us is the answer to question (E). What is 'aspect theory?' This has been stated in Federation of Hotel & Restaurant Association of India v. UOI - 1989 (3) SCC 634 as "Subjects which in one aspect and for one purpose fall within the power of a particular legislature may in another aspect and for another purpose fall within another legislative power. They might be overlapping; but the overlapping must be in law". The same transaction may involve two or more taxable events in its different aspects. But the fact that there is overlapping does not detract from the distinctiveness of the aspects." The Apex Court observed that the Kerala High Court in the Escotel case erred in including the cost of the service in the value of SIM card by relying on the aspects doctrine. They had categorically answered that the aspect theory would rot apply to enable the value of the services to be included in the sale of goods or the price of goods in the value of services. The implication of the above decision for the present case is that in the services relatin....
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....bber. The tyre after stipulated time are taken out from vulcanizing machine and allowed to cool in natural conditions. It is called as retreading tyre. 4. Service tax was demanded on "repair and maintenance service" introduced on 1-7-2003. Show cause notices were served on the assessees demanding tax and penalties for the period 1-7-2003 to 10-10-2005. The Adjudicating Authority confirmed the demand of tax and imposed penalties. The Commissioner (Appeals) modified the Adjudication Order in so far as the demand of tax prior to 16-6-2005 and penalties were dropped. 5. After hearing both the sides and on perusal of the records, we find that the service tax on "maintenance and repair services" was introduced on 1-7-2003, which was amended on 16-6-2005. For the purpose of proper appreciation of the case, the definition of the maintenance or repair service is reproduced below:- With effect from 1-7-2003 "Maintenance or Repair" means any service provided by - (i) any person under a maintenance contract or an agreement; or (ii) a manufacturer or any person authorised by him, in relation to maintenance or repair or servicing of any goods or equipment, excluding motor vehic....
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....iew that in the facts and circumstances of the case as also keeping in view that penalty under Section 76 has been imposed, the ends of justice would be met, if the penalty under Section 78 is set aside. I order accordingly. Rex POINTS OF DIFFERENCE The following points of difference are placed before Third Member for resolution :- Whether the assessees are entitled to the benefit of deduction of cost of raw materials consumed in providing maintenance and repair services, in terms of Notification No.12/2003-ST dt. 20.6.03 and hence differential duty demand together with interest and penalty are to be set aside, as held by learned Vice-President (OR) Whether the gross value of the service has to be adopted for the purpose of levy of service tax, and hence demand together with interest and penalty under Sections 76 & 77 of the Finance Act, 1994 are required to be upheld, as held by learned Technical Member. THIRD MEMBER ORDER M. Veeraiyan, Technical Member (As a Third Member) - The matter is listed before me for considering the points of difference recorded in Misc. Order No.1/10, dated 04.01.2010. 9. Heard both sides extensively. 10. The relevant facts ....
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.... MRF Ltd. and used one pack for each tyre for retreading of the tyre. After retreading work was completed, they prepared an invoice indicating separately the actual cost of the materials used and paying sales tax on the second sales of the materials as per Tamil Nadu General Sales Tax Act, 1959 till 31.12.2006 and thereafter VAT under Tamil Nadu VAT Act, 2006. The appellants have filed sales tax/VAT in respect of materials 'sold' or 'deemed to have been sold'. They have also filed returns to the sales tax authorities which stand assessed accordingly. (b) Their activities are covered under Section 3 (B) of the of Tamil Nadu General Sales Tax Act, 1959 till 31.12.2006 and thereafter under Section 5 of the Tamil Nadu VAT Act. (c) As they were paying sales tax/Vat on materials used in the retreading of the tyres, value of such materials used should be treated as value of goods sold and eligible for the exemption in terms of Notification No.12/03-ST, dated 20.06.2000. (d) Reliance placed by the Tribunal in the case of Speedways Tyre Service (supra) to hold that the material cost involved in retreading of the tyres should be included was not appropriate inasmuch as the dispute i....
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....the present case, there is no scope for inferring any in sale of materials while providing the service of retreading. (c) Regarding the decision of the Larger Bench of the Tribunal in the case of Aggarwal Colour Advance Photo System v. CCE [2011] 33 STT 33/13 taxmann.com 192 (New Delhi-Cestat) he submits that the issue regarding exclusion of value of other goods and material has been dealt with and it has been held as under:- "The value of other goods and material, it sold separately would be excluded under exemption Notification No. 12/2003 and the term 'sold' appearing thereunder has to be interpreted using the definition of 'sale' in the Central Excise Act, 1944 and not as per the meaning of deemed sale under Article 366(29A) of the Constitution." He also submits that the decision of the Larger Bench has taken into account various decisions of the Hon'ble Supreme Court including the decision in the case of Bharat Sanchar Nigam Ltd. cited (supra) and also decisions of the Tribunal including Shilpa Colur Lab cited (supra) sought to be relied upon by the appellants and held that only when there was sale of material in terms of the definition under the Central Excise Act, 1....
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....ting the worn out tyres retreaded and that they were not buying any materials. If there was sale of the materials, naturally, questions like what were the items sold, what quantities of the items were sold and at what rates they were sold arise. When these questions were put to the Ld. Advocate, he had no specific answers to these questions except stating that the invoices raised by the appellants indicated separately amounts towards material cost. There was also no satisfactory explanation as to how the cost of material claimed to have been sold remained the same in respect of tyres of particular size but of different companies and irrespective of the condition in which they were received for retreading. Therefore, their claim that the materials like tread rubber, patches, bonding gum etc., were sold by the appellants have to be rejected outright. 15.2 However, it is a fact that items like tread rubber, patches, bonding gum are utilised for retreading the tyres. In other words, these materials are consumed in the rendering of tyre retreading services. 16.1 Can it be considered that the items like tread rubber, patches and bonding gum which are consumed during retreading are ....
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....ance and Repairs Service'. Many decisions relating to photography services like the decisions in the case of Kerala Colour Lab Association v. Union of India [2007] 8 STT 353, decisions in the case of C.K. Jidheesh v. Union of India [2005] 2 STT 242 (SC), Rainbow Colour Lab v. State of Madhya Pradesh [2000] 2 SCC 385, have been relied upon. It is pertinent to note that in all these cases, the dispute related to photographic service which has been held to be a Works Contract by the Hon'ble Supreme Court. The Service Tax Valuation Rules also give special treatment in respect of valuation of photographic services by excluding the value of materials utilised for rendering such services. The 'Maintenance and Repair Services', which are concerned in the present case, do not have any significant resemblances with photographic services. Therefore, to treat such 'Maintenance and Repair Services' as equal to the photographic services is not justified. 17.2 In the present case, though the appellants, in the grounds of appeal have in their alternative submission, claimed that the services undertaken by them fell under Works Contract, they have not produced any contract for detailed examinati....