Tyre Re-Treading Classified as Works Contract: CESTAT Sets Aside Service Tax Demand [Read Order]

The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal(CESTAT)  ruled that tyre re-treading qualified as a works contract and set aside the service tax demand.

Tojo Tyre Retread,appellant-assessee,re-treaded used tyres. The Revenue classified this under "Management, Maintenance or Repair Service" (MMR) based on documents like cash credit bills, sales tax returns, and income tax records for 2008–09 and 2009–10. Since service charges were collected, a Show Cause Notice was issued on 16.09.2010, demanding service tax, cesses, interest, and penalties.

The Adjudicating Authority(AA) confirmed the demand through OIO No. 06/2011-ST, dated 28.02.2011. The First Appellate Authority upheld this through OIA No. 115/2012, dated 27.06.2012. The assessee appealed before the tribunal.

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The two member bench comprising P.Dinesha(Judicial Member) and  Vasa Seshagiri Rao(Technical Member) heard both parties and reviewed the records. The main issue was whether the assessee’s tyre re-treading activity fell under MMR and if the tax demand was justified.

The appellate tribunal noted that the assessee used consumables bought from sales tax-registered dealers and had paid sales tax. The claim for abatement under Notification No. 12/2003-ST was allowed for 2008–09 but denied for earlier years due to a lack of supporting documents.

Read More: CESTAT sets aside Service Tax Demand on Work Contract Service for the period before 1.06.2007

However, sales tax returns were on record but were not properly considered. Since the assessee was registered with the sales tax department and had paid applicable sales tax, there was no reason to reject the returns for 2005–06 to 2007–08.

It held that tyre re-treading was a works contract, making the materials used liable only to sales tax. The demand covered 2005–06 to 2008–09, but the Show Cause Notice was issued on 16.09.2010 by invoking the extended limitation period. Since the demand for 2008–09 was already dropped, the tribunal found that extending the limitation period for 2005–06 to 2007–08 was unjustified.

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The CESTAT set aside the order and allowed the appeal on the ground of limitation.

To Read the full text of the Order CLICK HERE

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