Customs, Excise & Service Tax Appellate Tribunal, Chennai: In the case wherein appellants received reimbursement of the cost of spares replaced in the course of service of vehicles from the manufacturer, the department alleged that the appellant was liable to pay service tax on the value of reimbursement of spares replaced. This was because the reimbursement received is to be included in the taxable value for payment of service tax, the appellant was charged for violating the provisions Finance Act, and Service Tax Rules. A Bench of P. Dinesha. (Judicial Member) and M. Ajit Kumar (Technical Member), examine the legal position of the Works Contract in accordance with the relevant provisions of the Finance Act, and Service Tax Rules. The Bench accordingly set aside the impugned order and held that the composite contracts for repair and maintenance of motor vehicles are leviable to service tax from 01-07-2012 onwards in view of Notification No. 19 of 2012 issued by the Ministry of Finance (Department of Revenue).
Appellants are registered with the Service Tax Department and are providing services under the category ‘Servicing of Motor Vehicles’ namely, “Authorised Service Station’. They have service centres and Trichy, Karur, Villupuram and Kumbakonam in their registration and making centralized payment at the registered premises at Coimbatore. Appellants had received reimbursement of the cost of spares replaced in the course of service of vehicles during the warranty period from the manufacturer for the period from April 2011 to March 2012.
The department alleged that the consideration is partly in money, value shall be the total of such monetary consideration money-equivalent of the other non-money consideration. Hence the appellant was liable to pay service tax on the value of reimbursement of spares replaced during the warranty period. As the reimbursement received is to be included in the taxable value for payment of service tax, the appellant was charged for violating the provisions of the Finance Act, and Service Tax Rules.
Show Cause Notice was issued to the appellant proposing to demand service tax along with other adjudicatory liabilities. After due process of law, the original authority confirmed such demand along with interest and imposed penalty under the Finance Act. The Commissioner after appreciating the facts and the findings of the lower authority upheld the order passed by the adjudicating authority. Hence the present appeal was filed.
Analysis, Law, and Decision
The issue under consideration was whether the service rendered during the warranty period will be liable to tax under ‘Repairs to Vehicle’ service or as a ‘Works Contract’. Relying on the opinion of the Supreme Court in Commissioner Central Excise & Customs, Kerala v. Larsen & Toubro Ltd., (2016) 1 SCC 170, the Court noted that ‘Works Contract’ is a separate species of contract distinct from contracts for services simpliciter recognized by the world of commerce and law as such and has to be taxed separately as such. The impugned service was examined as a ‘works contract’ with respect to its taxability.
The Court herein examined relevance of the legal position of Section 65(105)(zzzza) of the Finance Act, 1994 which deals with the taxability of works contract. In the new system all services, except those specified in the negative list, were subject to Service Tax. A major shift in the service tax provisions was made by the introduction of the ‘negative list’ of services in the Finance Act. It was observed that from 01-07-2012 on the behest of the Notification No. 19/2012 by the Ministry of Finance (Department of Revenue), the definition of ‘works contract’ was expanded to include repair and maintenance services of movable properties also. Hence, the composite contracts for repair and maintenance of motor vehicles are leviable to service tax from that date onwards. With regards to all such facts, the Tribunal set aside the impugned order and the appeal was successful. It was subsequently disposed of, and the appellant was made eligible for any consequential relief as per law.
[Shiva Automobiles Pvt. Ltd. v. Commissioner of GST & Central Excise, 2023 SCC OnLine CESTAT 464, decided on 08-08-2023]
Advocates who appeared in this case:
For the Appellant: Shri G. Natarajan, Advocate;
For the Respondents: Shri Harinder Singh Pal, AC (AR).