The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled on the service tax liability on handling charges collected by car dealers in the case of M/s Sky Automobiles Versus The Principal Commissioner.
The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that the invoices are issued by the appellant as authorised dealer of Maruti Suzuki. The invoices indicate that the sale was on ex-showroom basis and the price is indicated on this basis. In addition, that the appellant collected “other charges‟ from the customers. The ex-show room price included the price of the vehicle and the applicable VAT. In addition, the appellant collected an amount towards extended warranty and towards “other charges”.
The tribunal noted that the ex-showroom price of Rs. 2,90,828.06 is the sum of the price of the car (Rs.2,55,112.33) and VAT (Rs.35,715.72). The extended warranty and the other charges do not form part of the price of the car. Therefore, it is not possible to accept that these are handling charges and that they form part of the assessable value for VAT. In this case, they were clearly not part of the assessable value for VAT. Similar are the other invoices in the file.
The appellant/assessee is registered with the service tax department as provider of “authorised service station service‟ and “business auxiliary service‟ and was paying service tax at appropriate rates under section 66 of the Finance Act, 1994.
After 1.7.2012 (when the negative list regime was introduced and all services except those in the negative list were taxable), the appellant paid service tax as provider of services, under section 66B of the Act.
The appellant’s records were audited for the period 2010–2011, 2011–2012 and 2012–2013 (upto December 2013). It was noticed that the appellant was collecting “other charges” from the buyers of the vehicles. It was felt that the appellant was liable to pay service tax under section 65 (105) (zzz) “business auxiliary services” on these charges upto 2012 and thereafter as a “service‟ because it was not under the negative list.
The appellant was also providing exempted service of trading. It had availed CENVAT credit on common input services which were used both for providing taxable services and for providing exempted services in the form of trading. It was felt that the appellant had not maintained separate records of the input services used in providing taxable and exempted services and was therefore, required to pay an amount equal to 5%/ 6% of the value of the exempted services under Rule 6(3) of the CENVAT Credit Rules, 2004.
A Show cause notice dated 20.10.20156 was issued to the appellant proposing a recovery of the service tax on the “other charges” collected by the appellant under the head “business auxiliary services‟ up to 30.6.2012 and thereafter for the service rendered and recover an amount of Rs. 3,25,80,796/- calculated @5%/ 6% of the value of the exempted service, viz., trading activity under Rule 6(3)(1) of CCR.
The tribunal noted that recoveries such as handling charges are clearly charges for rendering a service in the form of handling. All services other than those in negative list are exigible to service tax in the post negative list regime and therefore, service tax has to be paid on such amounts. If no service tax was collected by the appellant from its customers on such amounts, the amounts so collected need to be treated as cum-tax values and the amount of service tax needs to be calculated backwards.
The CESTAT quashed the order to recover an amount of Rs.3,25,80,796/- calculated @5%/ 6% of the value of the exempted service, viz., trading activity under rule 6(3)(1) of CCR. The demand of service tax on the “other income‟ of the appellant is set aside for the extended period of limitation i.e., up to 30.9.2013.
The CESTAT quashed the demand of service tax on the „other income‟ of the appellant for the period 01.10.2013 to 31.03.2015 to the extent this income represents the value of the goods or petrol sold. It is upheld to the extent it is on account of the “handling charges‟ or any other amounts collected for rendering any other service. Since the appellant had not collected service tax on these amounts from its buyers, the amounts collected by the appellant should be taken as cum-tax values.
The tribunal remanded the matter to the Commissioner for the limited purpose of calculation of service tax as above after giving the appellant an opportunity to present its figures.
Case Details
Case Title: M/s Sky Automobiles Versus The Principal Commissioner
Case No.: Service Tax Appeal No. 51090 Of 2018
Date: 04.12.2024
Counsel For Appellant: Bimal Jain
Counsel For Respondent: Manoj Kumar
