AI Drafter 
TaxTMI 
TaxTMI 
2025 (11) TMI 7
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....ition of penalty of Section 76 of the Act. The facts which culminated into the said order, succinctly are as follows: 2. M/s Redington India Pvt. Ltd. [the appellant herein] are the authorized distributor of M/s Hawlett Packard India (P) Ltd. [M/s HP India, in short] . The appellants are registered with the service tax department for providing services under the category of Management, Maintenance or Repair services [MMRS]. DGCEI, unit received an information that M/s Redington India Ltd. was not discharging their service tax liability correctly on the value of services provided to their clients for after sale service of HP Indigo Printers. Department found that the package of service included free supply of spares and consumables for operational maintenance of the printers sold to their clients. But the appellant, with an intent to evade service tax, deliberately divided the said package of service into two different agreements and were not paying service tax on the consideration received against the services provided under consumables and part support agreement. The two different agreements are: (i) Service level Agreement; (ii) Consumables and Parts Support ....
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....purpose, the appellant has entered into an agreement dated 01.12.2003 with M/s HP India for the purpose of reselling of goods. There were two subsequent addendums to this agreement. Perusal whereof reveals that the appellant is engaged in reselling the commercial printers and also the consumables imported by M/s HP India Ltd. The said transaction of sale of printers is purely and exclusively in the nature of sale which is liable or payment of VAT. The applicable amount of VAT stands already paid by the appellant to authorized State VAT authorities. It is impressed upon that there is no element of service between the appellant and M/s HP India Ltd. Learned counsel further submitted that after purchasing the printers from M/s HP India Ltd., the appellants sell the same to the end customers in authorized State of India by virtue of two agreements. (i) Service level Agreement; (ii) Consumables and Parts Support Agreement. It is submitted that both the agreements are separate and independent between the appellant and its end customers. It is submitted that the appellant is discharging the service tax liability with respect to the consideration received in terms of s....
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....e Tribunal in which it was held that when the agreements and invoices reflecting the cost of material and labour separately and that the assessee had duly paid VAT/Excise duty on goods sold. No service tax would be leviable on the value of materials. Relying upon the said decision and the decisions as already mentioned above, learned counsel has prayed for setting aside the order confirming demand and imposition of penalty upon the appellant. 8. While submitting with respect to the cross appeal of the department, it is submitted that customers of the appellant are located in different states of the country. Resultantly, the appellant had registered itself with the VAT department of respective State Governments and has duly paid the amount of VAT on the consumables and spare parts sold by the appellant to its end customers. It is impressed upon that during the material period of time, rate of VAT paid was @ 12.5% which was more than the then rate of service tax which was 10.3%/12.36%. The relationship of appellant with M/s HP India was on principle to principle basis. Pursuant to the separate agreements entered by the appellant with the end customers the appellant had raised sepa....
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....onsumables and Parts supplied, and hence, their claim of deduction of the whole of the said amount while computing the value of taxable services was not sustainable. Therefore, the said contention has rightly been rejected and thus for the period from 01.07.2012 to 30.09.2014 Service Tax (including Cess) amounting to Rs. 11,76,43,916/- is rightly held recoverable from them. 10. Learned Departmental Representative emphasized that in the instant case an ingeniously crafted modus operandi of cleverly splitting the transaction was adopted. The contracts do not reflect the true state of affairs. It was thus a case of misrepresentation and suppression of the material facts from the department. Thus extended period rightly invoked in this case and appellants were also liable for penal action under Section 78 of the Act. Further the appellant had failed to issue invoice, indicating the correct amount and description of Services rendered and also failed to maintain proper records, therefore, have rightly been penalized rendering them liable to penalty under Section 77 of the Finance Act. The appellant is liable to be penalized under Section 76 also. With these submissions, the appeal fil....
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....thus: "(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 goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by instalments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the pers....
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....t that the clauses in Art. 366(29A) operate. By introducing separate categories of 'deemed sales', the meaning of the word 'goods' was not altered. Thus the definitions of the composite elements of a sale such as intention of the parties, goods, delivery etc. would continue to be defined according to known legal connotations. This does not mean that the content of the concepts remain static. Courts must move with the times. But the 46th Amendment does not give a licence for example to assume that a transaction is a sale and then to look around for what could be the goods. The word "goods" has not been altered by the 46th Amendment. That ingredient of a sale continues to have the same definition. The second respect in which Gannon Dunkerley has survived is with reference to the dominant nature test to be applied to a composite transaction not covered by Article 366(29A). Transactions which are mutant sales are limited o the clauses of Article 366(29A). All other transactions would have to qualify as sales within the meaning of Sales of Goods Act 1930 for the purpose of levy of sales tax." 17. While appreciating the above interpretation of the provision Hon'ble Sup....
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....ds. 20. Our attention was also invited to the Notification No. 12/2003, dated 20.06.2003 issued by the Government which recognizes the fact and exempts the value of materials sold during provision of a service. We also rely on the decision of this Bench in the case of Shilpa Colour Lab Vs. CCE [(2007) 8 STT 102 (Bang.-CESTAT)] which passed the order after considering Section 67, Notification No. 12/2003-ST and the Circular dated 03.03.2006 issued by the Board. It has been held that service tax is not payable on the amount on which sales tax is paid. A similar view has also been expressed in the case of Kone Elevators India (P) Ltd. Vs. CST [ 2007) 10 STT 133 (Chennai-CESTAT)] 21. Hon'ble Supreme Court in the case titled as Imagic Creative (P) Ltd. (supra) has also held that the payment of service tax and VAT are mutually exclusive. Hon'ble Supreme Court in the case of State of Karnataka Vs. Pro Lab & Ors [2015-TIOL-08-SC-CT-LB] while dealing with the State VAT Act with regard to imposition of sales tax on processing and supplying photographs, Photoprints & Photonegatives, held that while going into this exercise of the divisibility, dominant intention behind the contract, rem....
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.... the activity of sale of goods gets excluded from the definition of service itself. The essence and intent of notification 12/2013 has, therefore, been fully captured in the definition of service itself. The above clarification confirms the position that there is no change in the treatment in providing deduction of value of goods from the gross value even after 1.7.2012 and the position applicable in terms of Notification No. 12/2013 would need to be equally applied after 1.7.2012 also". 25. Reverting to the facts of the present case, it is observed that the two contracts involved in the present case are about two distinct purpose, one is for providing consumables and spare parts and another is for providing Maintenance Service of the printers sold to the end consumers not the composite works contracts but the independent contracts of service and sale but are the independent contracts of sale of consumables and spare parts and another for support and maintenance service. There is no dispute to the fact that the value of consumables used in providing the service has also been separately indicated. One of these agreements is purely for sale of goods as discussed above the....