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August 2015

2015 (38) STR 1191 (Tri.-Mum.) Automotive Manufacturers P. Ltd. vs. CCE, Nagpur.

By Puloma Dalal
Jayesh Gogri
Mandar Telang Chartered Accountants
Reading Time 2 mins
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No service tax can be levied on handling charges forming part of sale of goods especially when VAT/sales tax is levied.

Facts:
The Appellants were authorised dealers and a service station of Maruti Udyog Ltd. For the purpose of servicing the cars, spare parts were used which were procured from the depot or warehouse of the manufacturer. Appellants incurred octroi, freight, loading and unloading charges for procurement of these parts which was termed as handling charges. Service tax was demanded on these handling charges considering the activity of servicing as a composite activity of sale and service. It was argued that the handling charges were part of value of goods sold and VAT /sales tax was paid on them and such expenses had no relation with servicing and repairs. Board’s Circular No. 96/7/2007 clarifying that service tax would not be levied on transactions treated as sale of goods, subject to VAT / sales tax, by service station was also referred to.

Held:
The Tribunal held that the invoice clearly stated the value of goods and services rendered. Handling charges will not be subject to service tax, especially when VAT /sales tax had been paid on it. Such charges were incurred for procurement and bringing the goods to Appellants and hence, it was included in value of goods. Section 67 of the Finance Act 1994, levied service tax on consideration received for rendering services and not for supply of goods. Hence, it was held that no service tax was payable.

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