Service Tax can’t be levied in the Absence of Consideration: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai bench has held that in the absence of any consideration, service tax cannot be levied under the Finance Act, 1994.

The appellants are receiving goods for refurbishing or repair from their customers as and when the need for repairs is felt by the customers of the appellants. The repairs are usually carried out at the factory of the Appellant. SCNs were issued demanding service tax for the aforementioned service.

The Tribunal noted that there are two types of customers who are availing such services from the Appellants. Some customers have opted for the warranty/ guarantee scheme and some of them have not. The method followed by the Appellants is that in respect of the customers who have opted for the warranty/ guarantee the customers are not charged for the replacement of any parts, damaged, etc. In the other case the customers have charged for such parts.

“In either case, the Appellants are discharging the duty of Central excise on the spares/ parts used in repair and refurbishing on going through sample invoices it appears that the contention of the Appellant is correct. Though the service is rendered no remuneration for such repair and maintenance service is charged/ received by the Appellants. In the absence of consideration for the service rendered it cannot be argued that the Appellants are liable to pay service tax on such services provided by them,” the Tribunal said.

According to the Tribunal, the following four things must be satisfied to levy service tax. They are, (i) There is a service (ii) There is a service provider (iii) There is a service recipient (iv) There is a consideration for such service paid by the recipient of service to the provider of the service.

“In the instant case, among the above 4 only 3 conditions have been satisfied and 4th condition is not satisfied. In the absence of any consideration service tax cannot be charged obviously service tax cannot be charged on the value of the spare parts used for such repair or maintenance. It is not the department’s case that the Appellants have not discharged applicable Central Excise duty on the spare parts used by the Appellant in discharge of the service. The order-inoriginal and order-in-appeal have only cursorily mentioned that the Appellants are receiving consideration for the service rendered by them. However, as discussed above on going through the sample invoices it is seen that the Appellants submissions are correct,” the Tribunal said.

While granting relief to the assessee, the Tribunal held that “the department has not produced any evidence to the effect that the Appellants have received remuneration for such repair or maintenance service in the absence of the same no service tax is payable by the Appellants in the result no demands survive.”