The Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that no service tax is leviable for reimbursement of repairs carried out during the warranty period and other free services by the authorised car dealers.
The appellants, MGF Motors Ltd, are authorised dealers for selling and servicing of Hyundai cars manufactured by M/s. Hyundai Motors India Ltd. (HMIL) During the warranty period, the appellant provided free services to the customers who purchased the new motor cars from the appellants.
As per Clause 4.4 of the agreement entered into between HMIL and the appellant, they were not permitted to charge customers for any services for which the appellant is reimbursed by the HMIL for repairs carried out during the warranty period and other free services.
Alleging that the amount reimbursed to the appellant is chargeable to service tax for the period April 2006 to March 2007 in terms of Service Tax (Determination of Value) Rules, 2006, demand notice was issued for recovery of service tax of Rs.3,22,927/- on the said value along with interest and penalty. On adjudication, the demand was dropped by the Assistant Commissioner of Service Tax.
However, on review of the same, the Commissioner after affording an opportunity to the appellant confirmed the demand with interest and imposed penalty under Sections 76 and 77 of the Finance Act, 1994. Hence, the present appeal.
In CCE, Indore Vs. Jabalpur Motors Ltd, it was noted that “The provision of free servicing is merely incidental and intended to promote the sale of the cars. Hence, we are of the view that no service tax can be levied on the amount representing the dealers’ margin or any part of it which already has been subjected to sales tax. Consequently, we set aside the impugned order and allow the appeal.”
A Two-Member Bench comprising Dr DM Misra, Judicial Member and Pullela Nageswara Rao, Technical Member concluded that “We do not find any reason not to follow the said judgment of this Tribunal delivered for the earlier period. Consequently, following the said judgment, the present appeal is also allowed with consequential relief, if any, as per law.”
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