Service Tax cannot be levied on consideration received for supply of goods and even handling charges incurred in connection with the procurement of the parts to be sold further or to be used for repairing/ servicing of vehicles are not includible for payment of Service Tax as sales tax/VAT liability is discharged on the value inclusive of handling charges.
The decision has been taken
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH, MUMBAI
In the matter of
AUTOMOTIVE MANUFACTURERS PRIVATE LTD Vs COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS , NAGPUR.
Crux of the Decision:
Service tax is not leviable on a transaction treated as a sale of goods means when spare parts are sold by a service station during the servicing of vehicles. Even otherwise, what is liable to service tax is only the consideration received for servicing of the vehicles and not the consideration received for sale of parts or equipments.
"Whether the handling charges collected by the client, as part of the value of the goods when a composite activity of sale as well as services are involved, are liable to Service tax ?
Decision of the Bench :
We notice that the appellant are charging handling charges whenever automobile parts are sold either independently or part of the service and repair of automobiles. In both the situations, invoices are issued for the sale of the goods as well as for collection of service charges for the services rendered. Handling charges were incurred in connection with the procurement of the goods and are included in the value of the goods sold and sales tax/VAT liability is discharged on the value inclusive of the handling charges. Therefore, we do not understand how service tax levy would apply especially when the goods are subject to sales tax/VAT on a value inclusive of handling charges. It is not in dispute that the handling charges are incurred in connection with the procurement of the parts. If that be so they will obviously form part of the value of the goods when they are subsequently sold.
On the basis of above judgment it can be concluded that it is not in dispute that the handling charges were incurred in connection with the procurement of the parts and that is why this forms the part of the value of the goods when they are subsequently sold and hence will subject to VAT/Sales Tax and not to the Service Tax. The main things to be noted is that the handling charges incurred related to the transaction of Sale and not to the transaction of Service like repair/ service activity. On this basis also the expenditure related to the transaction of sale will be subjected to VAT/Sales tax and not to the Service Tax
Hari Global Advisory Services Pvt Ltd.
(Attorneys & Advisors for Service Tax, Central Excise & Custom , IPR).
L:01141051727 Ph. No.- 9953757893/9999036150.