M M Vora Automobiles Pvt Ltd VERSUS C.C.E. &  S.T.-Vadodara-ii

Customs, Excise & Service Tax

 Appellate Tribunal West Zonal

Bench At Ahmedabad

 

REGIONAL BENCH- COURT NO.3

Service Tax Appeal No. 13116 of 2013

 

(Arising out of OIA-PJ/190/VDR-II/2013-14 dated 24/06/2013 passed by Commissioner of Commissioner of Central Excise, Customs and Service Tax-VADODARA-I( Appeal))

 

M M Vora Automobiles Pvt Ltd

VERSUS

C.C.E. & S.T.-Vadodara-ii

APPEARANCE:

Shri M.G Yajnik, Advocate appeared for the Appellant

Shri Himanshu P Shrimali, Superintendent (AR) for the Respondent

 

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON’BLE MEMBER (TECHNICAL), MR. C.L. MAHAR

 

Final Order No. A/ 11535 /2023

 

 

 

 

RAMESH NAIR

DATE OF HEARING: 15.03.2023 DATE OF DECISION: 14.07.2023

 

 

The brief facts of the case are that the appellants are running the various service stations of Mahindra & Mahindra while providing services to the Vehicles of the Customers. They raise invoices for servicing and separately for the consumables such as Lubricating Engines Oil or parts etc. As regard, the service bill they discharge service tax under the Finance Act, 1994 and in respect of sale of consumables they charge state VAT and paid to the State VAT Department. The case of the department is that since the consumables were used for providing the service to various service station the value of the consumable should be  included in the gross value of service. Accordingly differential service tax demand was raised and the same was confirmed by the Adjudicating Authority and held by the Commissioner (Appeals) in the impugned order. Therefore, the present appeal.

2. Shri M. G Yajnik, Learned Advocated appearing on behalf of the Appellant submits that the issue is no longer res- integra in view of the following judgments :-

 

• SamtechIndustries  Commr. C.Ex.Kanpur -2015 (38) STR 240 (Tri.Del)
• Commissioner Samtech Industries – 2015 (38) STR J343 (All.)
• of C.Ex., Mumbai Vs. Seva Automotive Pvt. Ltd. – 2016 (46)STR 428 (Tri.-Mumbai)
• TanyaAutomobiles (P) Ltd  Commr. C.Ex., & ST., Meerut-I – 2016

(43) STR 155 (Tri.All)

• C.Ex.,& ST., Meerut- II Vs. Krishna Swaroop Agarwal – 2015

(37) STR 647 (Tri. Del)

 

• He submits that since theconsumables were sold on principle to principle basis to the customers of vehicles during service and VAT was paid thereon, the same cannot be included in the gross value of the

3. Shri Himanshu P Shrimali, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order.
4. We have carefully considered the submission made by both sides and perusedthe  We find that the appellant have raised service bill on which service tax was paid and in respect of the consumables the same was sold by raising sales bill on which VAT was paid. Therefore, part for which the goods were sold clearly covered under the sale of goods on which no service tax should be charged. This issue has been considered by this Tribunal in various judgments including judgment cited by the learned counsel. Some of the judgments are reproduced below:-

• Tanya Automobiles (P) Ltd  Commr. C.Ex., & ST., Meerut-I – 2016

(43) STR 155 (Tri.All)

 

“The appellant is an Authorized Service Station of Motor Vehicles. A. show cause notice dated 19-4-2012 was issued subsequent to audit during the December, 2010/January, 2011 wherein it appeared that the appellant was paying Service Tax on the labour charges only and not paying ST on value of spare parts and lubricants used in the course of servicing of the motor vehicles. It appeared to Revenue that the practice was not in tune under Rules 5 & 6 of Service Tax (Determination of Value) Rules, 2006 read with Section 67 of the FA read with C.B.E. & C. Circular No. 96/8/2007-Service Tax. Further it appeared to revenue that the C.B.E. & C. Circular No. 87/05/2006- Service Tax clarified that in respect of spare parts and consumables, which have been consumed during the process and are not available for sale, for availing such exemption in terms of Notification No. 12/2003-S.T., the goods must be sold and consequently they must be available for sale. It further appeared to Revenue that whether spare parts or consumables are consumed during the servicing of the vehicles, the Service Tax is to be discharged on entire amount of invoice/bills including the value of spare parts raised by the party against the servicing of vehicles. It was further observed in the show cause notice that where the party is liable to pay Service Tax on the entire invoices/bills raised by them, then by virtue of Notification No.

 

12/03-S.T. exemption is available to the extent of value of the goods and materials sold by the service provider to the service recipient, subject to the documentary proof of such sale exists and no credit of Central Excise duty paid on consumables and spares has been taken. It was further observed that the appellant is not entitled to benefit of Notification No. 12/03 as they are not issuing separate invoices for sale of spares. It further appeared to the Revenue that the spare parts and consumables utilized in the course of servicing of vehicles without which the service is not complete and hence an integral part of service. Accordingly, Service Tax was proposed to be levied on the amount relatable to spare parts and lubricants for the extended period October, 2006 to December, 2011 amounting to Rs. 5,81,935/- with interest and further proposal of penalty under Sections 76, 77 & 78 of the Finance Act.

 

2. The appellant contested the show cause notice by filing a written submission pointing out that they are showing the spare parts and lubricants separately in the invoice on which VAT/Sales Tax is being paid and on service components and labour charges, the Service Tax is being paid. Thus, no Service Tax can be levied on the sale of goods.

 

3. The show cause notice was adjudicated vide Order-in-Original dated 8-3-2013 and reduced amount of Rs. 4,74,146/- was confirmed considering that the appellant have already deposited an amount of 1,10,635/- for the period April, 2011 to December, 2011 which was confirmed by the Asstt. Commissioner along with interest and further penalty was imposed under Section 76 @ Rs. 200/- for every day during failure continue or at the rate of 2% of such tax, per month, whichever is higher up to the period 9-5-2008. Penalty of Rs. 10,000/- was imposed under Section 77 and Rs. 4,74,146/- under Section 78 of the Finance Act.

 

4. Being aggrieved, the appellant preferred an appeal before the Commissioner (Appeals), who vide the impugned order has been pleased to reject the appeal and has upheld the Order-in-Original.
5. Being aggrieved, the appellant is in appeal before this 

 

6. The learned Counsel for the appellant urges that the issue is no longer res integra as the same stands settled by order of another Division Bench of this Tribunal in the case of Samtech Industries v. Commissioner of Central Excise – 2015 (38) S.T.R. 240(Tri.-Del.), wherein the assessee was providing the service of repairing transformer and was using consumables like transformer oil and also component parts being coil etc., this Tribunal held, in view of the fact that it is not disputed that in respect of the supply of goods, used for providing of service of repair, Sales Tax/VAT is paid, which fact is evident from the invoice on  It was also observed that when the value of goods used is shown separately in the invoice and on the same Sales Tax/VAT has been paid, the supply of the goods would have to be treated as sale and the transaction which are sale cannot be a part of the service transaction. Accordingly, Service Tax is chargeable only on the services/labour charges and the value of the goods thereunder would not be includible in the assessable value. The Tribunal further observed that Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 has been struck down as ultra vires, the provisions of Sections 66 & 67 of the Finance Act by the Hon‟ble Delhi High Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. v. Union of India & Others – 2013 (29) S.T.R. 9 (Del.), it is categorically held that the value of goods used for providing the services which have been shown separately in the invoice, on which Sales Tax/VAT has been paid, cannot be included in assessable value and no Service Tax can be charged on the same.

 

• The learned Counsel draws our attention to the finding of the Commissioner (Appeals), wherein it is observed as follows : –

 

„I observe that the appellants are paying Service Tax on labour charges, i.e. servicing components of the bills and

 

paying VAT on value of the spare parts and consumable and lubricants.”

 

“I have perused copies of two sample bills enclosed with the appeal and find that the consumables e.g. gasket, filter, components, busing etc. are shown sold along with the service, are in the nature of integral part of the service.”

 

Accordingly, he urges that in view of the categorical finding that the appellants have charged the spare and lubricants separately in their invoice and have paid Sales Tax on the same, no Service Tax can be demanded and the learned Commissioner (Appeals) has erred in holding that Service Tax is applicable on the goods and lubricants observing that the service is not complete without using of consumables and lubricants.

 

• The learned Counsel further points out that ruling of the Tribunal in the case of Samtech Industries (supra) has been upheld by the Hon‟ble High Court of Allahabad reported at 2015 (38) S.T.R. J434. The learned Counsel also brings to our notice that in similar facts and circumstances in the case of M/s. Balaji Tirupati Enterprises, the B.E. & C. (Legal Cell) vide their letter dated 27-9-2013 addressed to the Commissioner of Central Excise, Meerut has observed as follows : –

 

“The matter has been examined. Upon examination, it has been observed that the party has specifically mentioned the cost of items supplied/sold and there is documentary proof specifically indicating value of the goods. In this situation in view of the Notification No. 12/2003-S.T., dated 20-6-2003 and Hon‟ble Supreme Court decision in the case of Commissioner v. Jain Brothers – 2012 (28) S.T.R. 162 (S.C.) demand of Service Tax against the party for the cost of goods supplied during repair does not appear sustainable. Therefore, the Board is of the view that in the overall facts and circumstances of the case, no purpose would be served in pursuing SLP in the matter.”

 

• He further urges that in view of the fact that Board have accepted the legal position and have not filed further appeal in the matter, the appeal is fit to be allowed.

 

7. Heard learned DR, who supports the impugned order. On query from the Bench, as regards the matter has been settled in view of the Board‟s letter dated 27-9-2013, the learned DR submits that the Tribunal may pass appropriate order.

 

8. Having considered the rival contentions and in view of the settled legal position in the case of Samtech Industries (supra), upholding the order of this Tribunal by the Hon‟ble High Court of Allahabad and also in view of the letter of the C.B.E. & C. accepted the legal position that the cost of items supplied/sold and there is documentary proof specifically indicating value of the goods, the demand of Service Tax against the assessee for the cost of the goods supplied during repair does not appear sustainable. In this view of the matter, we set aside the impugned order and allow the appeal with consequential benefits.
9. The stay application is also stand disposed”

 

• C.Ex.,& ST., Meerut- II Vs. Krishna Swaroop Agarwal – 2015

(37) STR 647 (Tri. Del)

 

“The Revenue has filed this appeal against Order-in-Appeal No. 194- ST/MRT-II, dated 31-7-2011 which set aside the Order-in-Original No. 13/ADDL. COMM./M-II/2012, dated 19-4-2012.

 

2. The facts, briefly stated, are as under :

 

M/s. Ashish Automobiles (Proprietor Krishna Swaroop Agarwal) provided the „Authorized Service Station‟ service. It was alleged that during the period January 2007 to March 2009 they discharged their Service Tax liability on the gross value of services but they did not take into account of the cost of spare parts or accessories or consumable such as lubricants and coolants provided/used during servicing of the vehicles. Adjudicating authority confirmed the demand amounting to Rs. 11,83,832/- along with interest and mandatory penalty. The Commissioner (Appeals) set aside the said Order-in-Original on the following grounds.

 

• Under Section 67 of the Finance Act, the taxable value is the gross amount charged for the taxable service.

 

• Even in terms of Notification No. 12/2003-S.T., the value of the goods and materials sold by the service provider to the recipient of service is exempt from the Service Tax.

 

• As per the C.B.E. & C. Circular No. 699/15/2003-CX, dated 5-3-2003 the price charged by authorised service station for engine oil, gear oil and coolants, etc., is towards the sale of these consumables to the customer. Therefore, the sale of consumables during course of providing service is akin to sale of parts/accessories and therefore value of such consumables is not includible in the value of taxable services provided value of such consumables is shown separately.

 

• The respondents had provided to the Commissioner (Appeals) their assessment orders of the Trade Tax department, Moradabad, for the financial years 2006-07 & 2007-08 showing sale value of spare parts/accessories/consumables and it is this value which has been taken for computing the impugned demand.

 

3. The Revenue has filed the appeal on the following grounds :

 

• Board Circular No. 96/7/2007-S.T., dated 23-8-2007 (para 36.03) has specifically clarified that Service Tax is not leviable on a transaction treated as sale of goods and subjected to levy of Sales Tax/VAT. Whether a given transaction between the service station and the customer isa sale or not, is to be determined 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.

 

“Any goods used in the course of providing service are to be treated as inputs used for providing the service and accordingly, cost of such inputs form integral part of the value of the taxable service”.

 

Where Spare parts are used by a service station for servicing of vehicles, Service Tax should be levied on the spare parts, including the value of the spare parts, raised by service provider, namely, service station. However, the service provider is entitled to take input credit of Excise Duty paid 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 service used as inputs service for servicing of vehicles.

 

• The respondent did not show proof of sale of spare parts to the service recipients.

 

• The Notification No. 12/2003-S.T. is not applicable as the value of spare parts/accessories is includible in the assessable value.

 

4. We have considered the facts of the case. The Board Circular referred to above in effect actually states that Service Tax is not leviable on the transaction treated as sale of goods and subjected to levy of sales tax/VAT. It is seen that as recorded by the Commissioner (Appeals), respondents were able to establish that amount on which the impugned Service Tax has been demanded actually pertains to the sale of spare parts/accessories/consumables like lubricants etc. by showing copies of the VAT assessment orders for the financial years 2006-07 & 2007-08. It would clearly entitle them to the benefit of Notification No.12/2003-S.T. Indeed even the provisions of Section 67 lay down that the value for the purpose of levy of Service Tax is the gross amount charge for taxable service. Thus, we do not find any merit in the Revenue‟s appeal which is hereby quashed.”

 

5. In view of the above judgments it can be seen that the issue is already settled hence, the same is no more res-integra. Accordingly, following the above Tribunal judgment we are of the view that the impugned order is not sustainable. Hence, the same is set aside. Appeal is allowed with consequential relief.

 

 

(Pronounced in the open court on )

 

RAMESH NAIR MEMBER (JUDICIAL)

C.L MAHAR MEMBER (TECHNICAL)