The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that service tax is not leviable on composite contracts for the maintenance and repair of vehicles which entails both the supply of goods and services before the period of 01.07.2012.
Ford India Pvt. Ltd, the appellant assessee are manufacturers of cars and had obtained service tax registration for the services rendered by them and the cars manufactured by the assessee are sold to Authorised Dealers (dealers), who in turn sell the cars to the ultimate buyers and the assessee was a service provider to the ultimate buyers of the cars as it was a contract between the assessee and the ultimate buyer of the car and the dealer.
The assessee appealed against the order passed by the Commissioner for confirming the demand for service tax of amount Rs.3,89,87,290/- along with the imposition of penalty and interest.
Raghavan Ramabhadran, the counsel for the assessee contended that the extended warranty plans are composite contracts involving labor by way of repairs and material by way of parts being replaced and under the service tax regime, taxability on the service tax portion of a composite works contract was made taxable for the first time with effect from the date of 01.06.2007.
Further submitted that the extended warranty plans are composite contracts involving labor by way of repairs and material by way of parts being replaced which was not subjected to service tax during the relevant period and the demand raised by the department was not as per the law and liable to be deleted.
M. Ambe, the counsel for the department relied on the decisions made by the lower authorities and contended that the assessee not been disclosing ‘repairs of vehicles’ as one of the services provided by them and as there had been the continuous sale of these services to the customers through their dealers without indicating the same in their returns and without discharge service tax and the assessee had indulged in a misstatement of facts with an intent to evade payment of service tax.
The Bench observed that Service tax is not leviable on composite contracts for maintenance and repair of vehicles which entails both supplies of goods and services for the period up to 01.07.2012.
Also held that after the insertion of section 65B(54) in the Finance Act 1994, 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 Ajit Kumar (Technical) held that the composite contracts for repair and maintenance of motor vehicles are leviable to service tax from 01.07.2012 onwards and the assessee was not liable to pay the service tax while allowing the appeal filed by the assessee.
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