The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the demand for service tax imposed on the repair and maintenance of motor vehicles on the ground of non insertion of section 65B(54) of the Finance Act,1994. The Bench held that the composite contracts for repair and maintenance of motor vehicles are leviable to service tax from 01.07.2012 onwards after the insertion of new section 65B(54) of the Finance Act.
Shiva Automobiles Pvt. Ltd, the appellant assessee was registered with the Service Tax Department and is providing services under the category ‘Servicing of Motor Vehicles viz. “Authorised Service Station’ and included their service centers and Trichy, Karur, Villupuram, and Kumbakonam in their registration and making centralized payment at the registered premises at Coimbatore.
The assessee appealed against the order passed by the Commissioner (Appeals) for confirming the demand for service tax along with interest and penalty under section 78 of the Finance Act.
G. Natarajan, the counsel for the assessee contended that the assessee was already paying service tax on the amount claimed towards labor/service charges from the automobile manufacturers, for undertaking servicing and repair during the warranty period and during the relevant period, any reimbursement of expenses claimed by a service provider cannot be subjected to levy of Service Tax.
Further submitted that no Service Tax can constitutionally be demanded on an activity amounting to sale, the question of exempting the Service Tax payable was redundant.
Harinder Singh Pal, the counsel for the department relied on the decisions made by the lower authorities and contended that when the consideration was partly in money, the value shall be the total of such monetary consideration money-equivalent of the other non-money consideration, the assessee was liable to pay service tax on the value of reimbursement of spares replaced during the warranty period.
The Bench observed that after the insertion of section 65B(54) in the Finance Act from 01.07.2012 onwards, the definition of ‘works contract’ was expanded to include repair and maintenance services of movable properties also and the composite contracts for repair and maintenance of motor vehicles are leviable to service tax from 01.07.2012 onwards.
The two-member bench comprising P.Dinesha (Judicial) and Ajith Kumar (Technical) held that the demand for service tax on repair and maintenance service was not sustainable on the assessee’s case and liable to be quashed while allowing the appeal filed by the assessee.
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