No Service Tax Chargeable on Warranty Labour for Free After-Sale Service: CESTAT [Read Order]
The tribunal found the issue already settled in favour of the appellant in earlier orders and noted no evidence of separate reimbursement from the manufacturer.
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The Delhi Bench of Customs,Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that no service tax was chargeable on warranty labour charges for free after-sale services. K.P. Automotives Pvt. Ltd,appellant-assessee, was an authorised Maruti dealer providing services at its authorised service stations. The dispute was whether service tax was payable on free...
The Delhi Bench of Customs,Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that no service tax was chargeable on warranty labour charges for free after-sale services.
K.P. Automotives Pvt. Ltd,appellant-assessee, was an authorised Maruti dealer providing services at its authorised service stations. The dispute was whether service tax was payable on free services offered during the warranty period.
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The Department issued a show cause notice in October 2017, alleging that the assessee had already received payment for these services from Maruti Udyog Ltd. at the time of vehicle sale. Since charges for the free services were recovered in advance, the Department held that service tax was payable.
The demand was confirmed with interest and penalty. The Commissioner (Appeals) upheld this decision, noting that the assessee received the amount before providing the services.
The assessee then challenged the order before the tribunal.
The two member bench comprising Binu Tamta (Judicial Member) and Hemambika R.Priya ( Technical Member) noted that apart from earlier orders in the assessee’s own case, similar findings were made by the Division Bench in Hindustan Auto House Pvt. Ltd. vs. CCE, Jaipur. In that case, the tribunal held that the so-called “free services” were not truly free, as their value was already included in the vehicle price, which was subject to excise duty and sales tax.
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It also found no evidence of separate reimbursement by the vehicle manufacturer for these services. Since no direct service charges were received from customers and no specific reimbursement was established, the appellate tribunal held that service tax and penalties were not justified.
Following these decisions, the CESTAT held that no service tax was payable on warranty labour charges for free after-sale services. The impugned order was not sustainable in law, and the appeal was allowed.
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