The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no service tax is leviable on the sale of vehicles subjected to Value Added Tax (VAT).
Jivan Jyot Motors Pvt Limited, the appellant is an automobile dealer who purchases vehicles and resale to the individual customer. While selling the vehicle to the customer, in their sale bill they charge some handling and forwarding charges. However, VAT was paid on the total value of the invoice including charges for handling and forwarding.
The department argued that handling and forwarding charges collected by the appellant from their customers are liable to service tax under the head of Business Support Service/ Business Auxiliary Service.
Shri Jigar Shah, Counsel appeared on behalf of the appellant submitted that firstly, the show cause notice is confusing since it could not conclude whether the activity handling and forwarding charges are falling under the category of Business Auxiliary Service or Business Support Service and the demand is not sustainable.
Further submitted that handling and forwarding charges are part of the total sale value of the goods on which VAT was paid by the appellant, therefore any element which is part of the sale on which VAT is paid, service tax cannot be charged on the said activity.
Shri Kalpesh P Shah appeared on behalf of the Revenue and reiterated the findings of the impugned order.
The Tribunal in a similar case held that “even in the worse situation in various cases where the parts and components were used in repair and maintenance of motor vehicle even then merely because the part so used in repairs and maintenance were separately billed and VAT was paid thereon, the Tribunal held that on the value of such parts, though used for repair and maintenance service of the vehicle will not be liable to service tax as the same was suffered VAT.”
“When there is sale of goods and VAT is paid no service tax can be demanded. In the present case, it is undisputed that the element i.e. amount towards Handling and Forwarding charges, the appellant has shown as part of the sale value of the goods and VAT was paid”, the two-member bench comprising Mr Ramesh Nair, Member (Judicial) and Mr C L Mahar, Member (Technical) held.
The bench set aside the impugned order and allowed the appeal.
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