Refurbishment of Used Cars Amounts to Self-Service: CESTAT Holds Maruti Suzuki’s Popular Vehicles Dealer Not Liable to Service Tax [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, has held that no Service Tax is payable on refurbishment activities carried out on pre-owned vehicles when such work is undertaken by the assessee for itself during its period of ownership.

The appellant, M/s. Popular Vehicles and Services Ltd., an authorized service station for Maruti Suzuki cars, was subjected to an audit by the Service Tax department. It was found that the company is engaged in buying and selling used cars after refurbishment and replacement of spares. The department alleged that the assessee had failed to pay Service Tax on refurbishment of old cars and issued a show cause notice demanding tax of ₹4,62,466 for the period 2005-06 to June 2009.

The adjudicating authority confirmed a demand of ₹2,21,273 along with interest and penalty under Section 78 of the Finance Act, 1994, which was upheld by the Commissioner of Service Tax (Appeals).

Appearing for the Appellant, Kuryan Thomas argued that the company purchased pre-owned cars, undertook refurbishment at its MTV unit and subsequently sold them. It was contended that the authorities erred in presuming refurbishment was done at the authorized service station merely because both units were located in the same premises.

It was also submitted that upon payment and delivery, ownership of the vehicles transferred to the appellant under the Sale of Goods Act, 1930 and the requirement of mutation in the Motor Vehicles Act, 1988 was irrelevant for Service Tax purposes.

Reliance was placed on the Tribunal’s decision in Sai Service Station Ltd. v. (2015), affirmed by the Kerala High Court in CCE v. Sai Service Station Ltd. (2017), which held that refurbishment during the assessee’s ownership does not amount to a taxable service.

Appearing for the Revenue, N. Satyanarayanan, reiterated the findings of the impugned orders, maintaining that the assessee acted as an intermediary between buyer and seller and that the refurbishment cost represented consideration received from customers, thereby attracting Service Tax liability.

The Bench, comprising Judicial Member P. Dinesha and Technical Member M. Ajit Kumar observed that the matter was settled by judicial precedents which clarified that the sale of vehicles is governed by the Sale of Goods Act, 1930, and not dependent on registration from the Regional Transport Office.

Accordingly, the Tribunal held that refurbishment carried out while the vehicle is owned by the assessee amounts to self-service, is not a service to another person and thus falls outside the ambit of Service Tax. Accordingly, CESTAT set aside the orders of the lower authorities and allowed the appeal with consequential relief.

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