TaxTMI 
TaxTMI 
2018 (9) TMI 1515
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.... • In the case of availment of CENVAT credit they have opted to pay 5% of tax in the gross profit on the trading activity as per Rule 6(3) of the CENVAT Credit Rules, 2004; and • They will be availing credit for all the input services, except certain input services if used for exclusively rendering any exempted services. 1.1 Vide another letter Ref. CO/ST/44 dated nil, the assessees clarified that they at arrived 5% of difference between sale price on the cost of goods sold, which may be called as gross profit; that in their goods the difference between sale price and cost of goods sold is more than 10% of cost of goods; that such computation was done as per Explanation (C) to Rule 6(3) of CENVAT Credit Rules, 2004 vide Notification No. 13/2011-CE (NT) dated 31.3.2011. In response, the jurisdictional Assistant Commissioner vide letter dated 29.12.2011, informed the assessees to pay an amount equal to 5% on taxable value determined under Section 67 of the Finance Act, 1994 i.e. 5% of the gross value of the franchisee service and servicing of motor vehicles (both value of goods sold and service charges received). The assessees were reminded by the jurisdic....
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....o be included in the gross value of taxable services under Section 67 of the Finance Act, 1994; that the assessees are liable to pay an amount of 5% of gross value of exempted services as per Explanation 1(a) to Rule 6(3) and Rule 6(3A) of CENVAT Credit Rules, 2004 r/w Rule 2(e); in addition to payment of 5% on gross profit of trading activity as per Explanation 1(C) to Rule 6(3) and Rule 6(3A) of CENVAT Credit Rules, 2004. 1.3 The goods sold to service recipients of franchisee services and servicing of motor vehicle services is not trading of goods, but is actually sale of goods in the course of providing taxable services (franchisee service and servicing of motor vehicles) 1.4 In view of the above, it appears that the value of such goods (sold during the course of providing taxable services) is to be included in the gross value of taxable services under Section 67 of the Finance Act, 1994 and that the assessee are liable to pay an amount of 5% on gross value of exempted services as per Explanation 1(a) to Rule 6(3) and 6(3A) of CENVAT Credit Rules, 2004 read along with Rule 2(e), in addition to payment of 5% on gross profit on trading activity as per Explanation 1(C) to Rul....
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....ly on the following grounds:- i. It could be seen from the show cause notice dated 11.06.2013 and the statement of demand dated 23.04.2014 that the charge against TVS was that the method adopted by them for payment of amount under Rule 6 of CENVAT Credit Rules, 2004 was wrong as they had adopted the method provided under Explanation 1(C) to Rule 6 instead of Explanation 1(a) to Rule 6 and sought to demand 5% of the total value of spares sold by them during the course of providing the services under MRS/FRA though exempted under Notification No. 12/2003 ST dated 01.03.2003 was covered by the definition of „exempted service‟ value in terms of definition of under cause of Rule 2 of CENVAT Credit Rules, 2004. The argument provided in the notice was that the value of goods traded, as claimed by the notice, was actually value of goods sold during the course of providing the above services. ii. It could be seen from the notice and the documents available on file that the facts were quite different. It is seen that the notice had sold spares during the course of provision of taxable services namely MRS as is evident from the sample invoices available in the fi....
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....controversy in respect of these activities except in relation to that involving divisible contract of goods and servicing. (b) The appellant themselves only had informed the department vide their letters dated 1.12.2011 and 8.3.2012 regarding the various types of activities done by them and also in particular regarding the manner of reversal of CENVAT credit taken in respect of such contracts. (c) The adjudicating authority instead of providing arguments as to why the method adopted by TVS for payment of amount under Rule 6(3) of CENVAT Credit Rules, 2004 was wrong, has elaborately gave findings to the effect that the value of materials sold by them were to be included in the value of services as per Section 67 of the Act ibid and that as the Assessee had not fulfilled the conditions stated in the notification No. 12/2003 St dated 01.03.2003 namely "credit of duty paid on goods and materials sold has been taken under provisions of CENVAT Credit Rules, 2004 and not paid the amount equal to such credit availed before the sale of such goods and materials" were not eligible for the exemption provided in the said notification. In the further paras also the adjudicating....
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.... of materials and by virtue of the notification mentioned above, in cases of works contract service, only the service portion of the contract is taxable. Therefore the demand that the appellants ought to pay tax on the entire value including the value of materials sold is not acceptable. (v) The greatest contradiction in the subject notice is that on one hand the notice seeks to include value of the parts sold in taxable value of taxable services and at the same time treats such sale as exempted service. (vi) The appellants vide their reply to the Statement of Demand submitted, in addition to the grounds in their reply to Show Cause Notice, the following:- (vii) The officer has not taken into consideration the letter written to the Deputy Commissioner dated 30.012014 before issuing the statement of demand wherein the case of Ketan Motors td (v) CESTAT, Nagpur was enclosed, in which it was held that, if a transaction involves only sale of parts, question of levying service tax would not arise at all". (viii) Since Cenvat Credit Rules themselves use the expression trading as synonymous with sale as seen from the explanation 1(c)to Cenvat Credit Rul....
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....o the servicing station where the service engineer inspects the vehicles and prepares the job card with the details of the vehicle and the spares are directly delivered to the servicing engineer and accordingly he holds that the spares are consumed during the course of providing the service and no sale is taking place. The above findings are not correct in view of the decision of the Hon‟ble Supreme Court in the case of Bharat Sanchar Nigam Ltd vs Union of India 2006(2) STR 161. Hence the reasoning adopted by the commissioner in para 21 based on alleged bifurcation of value of services and goods is also not correct. (xii) In para24 of the impugned order the Commissioner has totally misunderstood the entire concept of sale and service and inclusion of sale value of the goods in the taxable value of service because of his wrong presumption and assumptions and basis which have already been refer to by the appellants in the grounds of appeal. The appellants have also aggrieved that, inspite of various decisions cited before him, Commissioner has not considered any of the said decisions. (xiii) Even otherwise, the whole issue is one of the interpretation of law a....
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....ces rendered by TVS and so the value of such goods said would form part of the gross value of service in terms of section 67. But as there is clear evidence in the invoice to show that the goods were sold and that there was no evidence on record to show that they had availed Cenvat on such goods by TVS, the value of such goods sold during the course of provision of services were eligible for the exemption under Notification No12/2003 ST dated 01.03.2003 for the purpose of service tax However for the purpose Rule 6(3) (i) of CCR such value had to be treated as an „exempted value‟ terms of the definition of exempted service which is defined under Rule 2(e) of the CCR. 3.3 Hence for the purpose of amount payable under Rule 6(3)(i) of the CCR the exempted value had to be taken in to account and therefore the notice was liable to pay an amount equal to 5% of such „exempted value‟ in terms of Rule 3(3) (i) of CCR read with the above definition of exempted services „provided under cause (e) of Rule 2 of CCR. The AA has not given any findings either to support this aspect or counter the arguments of the notice and has simply confirmed the demands proposed i....
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....aspect of whether Notification 12/2003-ST dated 1.3.2003 has been fulfilled by the assessee in this case. Discernibly, non-fulfillment of Notification No. 12/2003-ST was not an allegation or charge raised in the show cause notice. True, para 4.4 of the notice dated 11.6.2013 did reproduce a portion of the Notification 12/2003-ST, however, without making any reference or connection to the facts of the case or making any allegation that the conditions of the notification have been violated by the department. We further find that in para 19, the adjudicating authority has made a reference to Circular No.96/7/2007-ST dated 23.8.2008 which had inter alia clarified that where spare parts are used by a service station for servicing of vehicles, service tax should be levied on the entire bill including the value of the spare parts. That however service provider is entitled to take input credit of excise duty paid on such parts or any goods used in providing service wherein value of such goods has been included in the bill. We are unable to fathom why the adjudicating authority has chosen to apply the facts of the case to the said circular dated 23.8.2008, particularly, when the said circul....