LexSAFETY RETREADING COMPANY (P) LTD. versus COMMISSIONER OF CENTRAL EXCISE, SALEM
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'A [2017] 4 S.C.R. 714 SAFETY RETREADING COMP~NY (P) LTD. v. COMMISSIONER OF CENTRAL EXCISE, SALEM (Civil Appeal No. 641 of2012) B JANUARYlS,2017 [RANJAN GOGOi AND ASHOK BHUSHAN, JJ.] Finance Act, 1994 - ss. 65(64), 65(105)(zzg), 66 and 67 - Service Tax - Exigibility to - Whether in a contract for retreading C of tyres, service tax is leviable on the total amount charged for retreading including the value of materials/goods used/sold in execution of contract or only on the service component - Held: Assessee liable to pay tax only on the service component which under the State Act is quantified at 30% - Assessee had paid service tax under the local Act, whereunder it was registered as a Works · D Contractor, in respect of the component of gross turnover - Thus, in view of s.67, which exempts costs of parts or other material, if any, sold (deemed sale) to the customer while providing maintenance or repair service, the finding of CESTAT, per majority that in a contract of the kind under consideration there is no sale/deemed E sale of parts or other materials ·used in execution of contract of repairs and maintenance and that the entire gross value of service rendered is liable to service tax, does not lay down correct proposition of law - Finance Act, 2003 - Customs and Excise. F Service Tax - Notification/Circular - Benefit under - When available - Notification No.1212003-ST dated 20 117 June, 2003 and CBEC circular dated 7th April, 2004 - Held: s.67, Finance Act, 1994 deals with valuation of taxable services for charging service tax, specifically excluding the costs of parts or other material, if any, sold (deemed sale) to the customer while providing maintenance or repair service - The same is provided by Notification/Circular in · G question, subject to the condition that the assessee provides adequate and satisfactory proof in this regard - In the present case, the invoices which the appellant-assessee brought on record by way of illustration show the break up of gross value received - The same was not contested - Thus, respondents plea with regard to lack of proof of incurring expenses on goods and materials H 714 SAFETY RETREADING COMPANY (P) LTD. v. 715 COMMISSIONER OF CENTRAL EXCISE transferred to the recipient of the service provided, is an afterthought A - Finance Act, 1994 - s.67. Disposing of the appeals, the Court HELD: 1.1 The exigibility of the component of the gross turnover of the assessee to service tax in respect of which the assessee had paid taxes under the local Act whereunder it was B registered as a Works Contractor, was no longer in doubt in view of the clear provisions of Section 67 of the Finance Act, 1994, as amended, which deals with the valuation of taxable services for charging service tax and specifically excludes the costs of parts or other material, if any, sold (deemed sale) to the customer while c providing maintenance or repair service. This, in fact, is what was provided by the Notification dated 20th June, 2003 and CBEC Circular dated 7th April, 2004, subject, however, to the condition that adequate and satisfactory proof in this regard is fort~coming from the assessee. On the very face of the language used in Section 67 of the Finance Act, 1994 the view held by the majority D in the appellate Tribunal that in a contract of the kind under consideration there is no sale or deemed sale of the parts or other materials used in the execution of the contract of repairs and maintenance, cannot be subscribed to. The finding of the appellate Tribunal that it is the entire of the gross value of the E service rendered that is liable to service tax, does not lay down the correct proposition of law, which is, that an assessee is liable to pay tax only on the service component which under the State Act has been quantified at 30%. [Para 10) [719-H; 720-A-D] 1.2 An argument was advanced by respondent that there F was no evidence forthcoming from the side of the assessee that the value of the goods or the parts used in the contract and sold to the customer amounts to seventy per cent (70%) of the value of the service rendered which is the taxable component under the State Act. The aforesaid argument overlooks certain basic features of the case, namely, the undisputed assessment of the G assessee under the local Act; the case projected by the Department itself in the show cause notice; and thirdly the affidavit filed b
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