The Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) set aside Service tax demand as taxable value comes below exemption limit. The Tribunal found that the Commissioner seriously erred in observing that the appellant is liable to service tax on the service portion, which is below the threshold limit of SSI exemption.
Rakesh Tyres Services, the appellant challenged the order-in-appeal whereby the appeal filed by the Department was allowed and the impugned order-inoriginal dropping the demand was set aside. The appellant is engaged in providing services of retreading of tyres of motor vehicles to their clients during the period from April, 2007 to March, 2012. On the basis of the information circulated by DGFT that in the case of M/s.Speed Ways Tyre Service Vs. CCE –, the Tribunal has held that tyres retreading activities attract service tax under the category of “Management, Maintenance and Repair Service” as defined under Section 65(105)(zzg) of the Finance Act and, therefore, the appellant was liable to pay service tax. Show cause notice dated 16.10.2012 was, accordingly issued to the appellant raising demand of service tax to Rs.6,26,398/- with interest and penalty.
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The Adjudicating Authority vide order-in-original dropped the demand holding that the demand pertains to the service tax on the material consumed during retreading of tyres, on which no service tax was leviable as per Notification no. 12/2003 dated 20.06.2003 and secondly, the value of the services rendered was below the threshold limit in terms of notification no.6/2005 dated 1.3.2005. Consequently, the penalty was also dropped.
The Department being aggrieved by the said order preferred an appeal. The Commissioner (Appeals) by the impugned order virtually agreed with the findings arrived at in the order-inoriginal that the benefit of notification no.12/2003 granting benefit in respect of the materials used during the process of retreading of tyres is applicable to the assessee.
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On the issue of leviability of service tax on the value of the services, the Commissioner also agreed with the findings of the Adjudicating Authority that the value is below the threshold limit. Though the findings were recorded in favour of the appellant and, therefore, the appeal filed by the Revenue was required to be dismissed, however, in the concluding para, the learned Commissioner set aside the impugned order and allowed the appeal filed by the Department. Hence, the present appeal has been filed.
The Tribunal found that the Commissioner seriously erred in observing that the appellant is liable to service tax on the service portion, which is below the threshold limit of SSI exemption. Once the finding is that the value of the service portion is below the threshold limit, they are entitled to exemption from service tax. The appellant is entitled to avail the benefit of the prescribed limit in terms of Notification no.06/2005-ST dated 1.3.2005, whereby the taxable services not exceeding Rs. Four Lakhs were exempted in any financial year.
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The threshold exemption limit was enhanced to Rs. Eight Lakhs w.e.f. 01.04.2007 and Rs. Ten Lakhs w.e.f. 01.04.2008, which is applicable to the period in question.
Consequently, the appellant is entitled to exemption from the whole of the service tax leviable thereon under Section 66 of the Finance Act. There is an error in the impugned order when despite the findings being in favour of the appellant/assesee, the appeal filed by the Revenue was allowed.
A two member bench of Ms. Binu Tamta, Member (Judicial) And Ms. Hemambika R. Priya, Member (Technical) found that the commissioner observed that the appellant has fulfilled the condition of Notification No.12/2003-ST dated 01.07.2003 and, therefore, the value of the material has be excluded and since the taxable value comes below the exemption limit on which also no service tax can be levied. The logical consequence is that the appeal filed by the Department has to be dismissed and the impugned order has to be affirmed.
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While allowing the appeal, the CESTAT set aside the impugned order which holds that the appellant is liable to service tax on service portion only, which is below the threshold limit needs to be set aside. Ms. J. Kainaat, Advocate appeared for the appellant and Shri Anand Narayan, Authorised Representative appeared for the respondent.
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