AI Drafter 
TaxTMI 
TaxTMI 
2023 (10) TMI 355
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....thority has dropped the demand considering the board circular No. 96/7/2007-ST dated 23.08.2007, however, in the same circular as per clarification appearing under Colum 3 of the circular, where spare parts are used by service station for servicing of vehicles. The service tax should be levied on the entire bill including the value of spare parts raised by the service provider namely service stations. 2.1 He further submits that Para 6 of the Central Board of Excise and Customs circular dated 23.08.2007 clarified all the earlier circular include the circular dated 05.03.2003 relied upon by the Adjudicating Authority stands withdrawn. Therefore, the finding of the Adjudicating Authority is not correct. He submits that the board circular is binding on the Adjudicating Authority therefore, he should not have dropped the proceeding at the show cause notice. 3. Shri Jigar Shah, Learned Counsel appearing on behalf of the respondent submits that now the issue is no longer res-Integra as in the identical facts where the sale bill includes any elements on which VAT has been paid the same will not be subject to Service Tax. He submits that in respect of spare parts used for servicing o....
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....id on such parts or any goods used in providing the service wherein value of such goods has been included in the bill. The service provider is also entitled to take input credit of service tax paid on any taxable services used as input services for servicing of vehicles. From the above clarification, it is absolutely clear that even during the course of servicing of the vehicle, if any spare part is used and the same is shown as sale of the goods and VAT is paid no service can be demanded on the same. The revenue in the appeal misinterpreted the said clarification by considering part of the portion of the clarification in second Para thereof that any goods used in the course of providing services are to be treated as inputs and used for providing the service and accordingly cost of such inputs to be included. Considered the third Para of the clarification according to which where spare parts are used by service station for servicing of vehicles. Service tax should levied on the entire bill including the value of the spare parts raised by the service provider namely service stations. 4.1 We find that the revenue in their appeal taken the above clarification in isolation as the....
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....ers is undisputedly a part of sale price. For ease of reference, sample copy of the sale invoice is scanned below : - 6. From the above invoice it can be seen that VAT 12.5% was calculated on the total value i.e. basic price plus handling and forwarding charges and paid to the concerned State authorities. In this fact, as per the above invoice, handling and forwarding charges nothing but part of the sale value of the vehicle sold by the appellant to their customer. It is obvious that sale value consists of various elements and the same cannot be vivisected to contend that some part of the value represent to the sale of goods and some part towards service. Once on total value the VAT is paid then on any part of such value service tax cannot be demanded. This legal proposition affirmed by Hon'ble Supreme Court in the case of CST vs. UFO Moviez India Limited - 2022-VIL-07-SC-ST (in Civil Appeal No. 181 of 2022 dated 06.01.2022) wherein the Hon'ble Supreme Court has passed the following order:- "In the facts of the present case as it is not disputed that the respondent had regularly paid amount towards VAT liability in respect of the subject goods during the relevant ....
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....d taking into account the real nature and material facts of the transaction. Payment of VAT/sales tax on a transaction indicates that the said transaction is treated as sale of goods". 5.3 From the reading of the above circular, it would appear that even in a case of composite transaction involving sale of goods and rendering of service, if the bill/invoices issued clearly shows payment of sales tax/VAT on the spare parts, then the value of such spare parts would not be includible in the gross consideration received for rendering of service. The Commissioner has not considered these submissions made by the appellant and also the clarifications issued on the matter. Therefore, we are of the considered view that the matter has to go back to the adjudicating authority for fresh consideration. First of all, all the transactions involving only sale of spare parts should be excluded for the purpose of computation of service tax demand. Secondly, even in a case where the transaction involves both sale of spare parts and also rendering of service, the value of sale of spare parts should be excluded if sales tax/VAT liability has been discharged on such sales as is evident from the....
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....g charges for the spare parts should form part of the taxable value of the service rendered by the appellants. Accordingly, a notice dated 16-2-2005 was issued demanding service tax of Rs. 2,52,543/- for the period July, 2001 to February, 2004. The said demand was confirmed vide order dated 18-5-2006. Against this, the respondent preferred an appeal before the lower appellate authority. The lower appellate authority noted that in the case of authorised service stations, the cost of the spare parts are not to be included in the value of the services rendered as per Section 67 of the Finance Act, 1994, as it stood at the relevant time, since the cost of spare parts itself is not includible; therefore, handling charges incurred in respect of such spare parts also will not form part of the taxable value of the service rendered. Accordingly, he dropped the demand. The Revenue is aggrieved of the same and is before us. 3. The Revenue reiterates the grounds urged in the show cause notice that handling charges incurred for the spare parts should form part of the taxable value of the services rendered. 4. The ld. Counsel for the respondent reiterates the conclusions drawn ....