The appellants are authorized dealers of Tata Motors. In
respect of cars sold by the appellants, the Excise duty is paid by Tata Motors
on the value of cars less the dealers’ discount. The appellants sell the cars
at the full price to the customers and pay sales tax on such price. They also
provide free after sales service to the customers by charging only the
material cost and not labour charges. It is an admitted fact that Tata Motors
does not reimburse the cost of free after sales service provided by the
appellants in respect of cars.
It was further contendted that several dealers of
automobile manufacturers in the country and the sales pattern is the same, as
also the pattern of providing free servicing, but only in the case of the
appellants, the department has demanded the impugned amount towards service
tax and in no other case such demands have been made on any other dealers. He
further refers to the decision of Bangalore Bench of the Tribunal in the case
of Idea Mobile Communications Ltd. vs. CCE, Trivandrum reported in 2006 (4)
S.T.R. 132 (Tri) = 2007 (78) RLT 532 (CESTAT- Ban), which has held that
the service tax is not leviable when sales tax has been paid. He further
points out that the Bangalore Bench has relied on an observation of the
Hon’ble Supreme Court in the case of M/s Gujarat Ambuja Cements Ltd. vs.
UOI - 2006 (67) RLT 469 (S.C), which reads as under:
"This mutual exclusivity which has been reflected in
Article 246(1) means that taxing entries must be construed so as to maintain
exclusivity. Although generally speaking, a liberal interpretation must be
given to taxing entries. This would not bring within its purview a tax on
subject matter which a fair reading of the entry does not cover. If in
substance the statute is not referable to a field given to the State, by any
principle of interpretation allow a statute not covered by it to intrude upon
this field.'
The Tribunal held that in the constitutional scheme of
things, there is mutual exclusivity between the taxability of sale of goods,
which is charged to sales tax by the State; the excise duty on manufactured
goods which is levied by the Centre; and the tax on services, which is also
levied by the Centre. The impugned amount in question is a part of the
dealers’ margin which has been recovered by the appellants as a part of the
sale value of the cars from the customers and the entire amount has been
subjected to sales tax by the concerned State Government authorities. When the
appellants sold the cars and recovered the amount including the dealers’
margin, the dominant intent, was to sell the goods namely, cars and not to
provide free after sales service. In our view, the entire amount including the
dealers’ margin has been rightly taxed to sales tax representing the value of
the cars. The provision of free servicing is merely incidental and intended to
promote the sale of the cars. Hence, we are of the view that no service tax
can be levied on the amount representing the dealers’ margin or any part of it
which already has been subjected to sales tax.
The appeal of the appellant was allowed.
ASL Motors Pvt. Ltd. vs. CCE Patna 9 STR 356 (Tri-Kolkata)
The relevant facts are that the appellant is registered as
minor port and is rendering the port services. On the basis of some
intelligence officers of Central Excise and Service Tax visited the premises
of the appellant and after investigation came to the conclusion that during
the period 16th August, 2002 to 30th June, 2003, appellant had rendered
services falling under the category ‘Storage and Warehousing Services’ and are
liable to pay service tax on the said services. A show cause notice was issued
to the appellant demanding the service tax and also proposing for imposition
of penalty on them. Appellant contested the said show cause notice on the
ground that they are registered as minor port with the authorities and as such
are providers of the port services and are not rendering any services of
storage and warehouse. The said contentions were not accepted by the
adjudicating authority and the demand of service tax was confirmed and
penalties were imposed. On an appeal the learned Commissioner (Appeals)
concurred with the findings of the adjudicating authority. The appellants
being aggrieved by such order are in appeal.
On behalf of the appellant it was argued that the services
provided by the appellant in this case will not fall under the category of
Storage and Warehousing services for the reason that the appellant is
registered as minor port and started operation in the month of January 2001.
It is the submission that the appellant has always projected themselves as
minor port and the incidental storing and warehousing of the imported goods
and/or goods to be exported are connected with the activity of the port
services rendered by them. It is his submission that the clarification dated
1st August, 2002 issued by the Department of Revenue would also indicate that
the Storage and Warehousing facility of the ports will be covered in the
category of Port Services and not under storage and warehousing services. It
is also his submission that since the port services provided by the minor
ports came into the service tax net from 1st July, 2003, the services tax
liability to the period earlier under any other category would not arise.
The department on the other hand argued that the appellant
had in fact rendered the services of storage and warehousing as the invoices
issued indicate that they are charging rental charges for the storage of the
goods in the facility. It is also his submission that the intention of the
appellant is very clear from the invoicing pattern that they intend to provide
the services of storage warehouse during the relevant period. IT was also
submitted that the appellant has not disputed this fact. It is his submission
that during the relevant period the port services of minor port were not
covered but that in itself would not preclude the department from demanding
the tax from the appellant under other category of storage and warehousing
services.
One of the members of the Tribunal after going through the
basic enactments observed that the appellant during the relevant period or
prior or subsequently never projected themselves as storage or warehouse
keepers, but have consistently been staking claim that they are minor port and
provide services in connection with the port services. If the contention of
the revenue is upheld it would mean the vivisection of the mandated composite
services rendered by the appellant. Hon’ble Supreme Court in the case of
Daelim Industrial Co Ltd. [2007 (5) S.T.R. J99 (S.C) = 2004 (170) E.L.T. A181
(S.C.)] has upheld the judgment of the tribunal [2006 (3) S.T.R. 124 (T) =
2003 (155) E.L.T 457 (Tri-Del)] holding that for the sake of taxing an
activity the contract cannot be vivisected. Though the issue in that case was
regarding the taxability of the different activities in a works contract, the
ratio that there cannot be a vivisection of a composite activity for the
purpose of taxing will be applicable in this case, inasmuch, that in this case
appellant has always projected themselves as provider of port services and the
activity of the storage of the goods were in synchronization of the said port
services and that cannot be vivisected for taxing under the category of
storage and warehousing services and also further on face of the fact that the
services as provided by the appellant were covered subsequently from July 2003
under the category of port services. This view of ours is also fortified from
the clarification issued by the Revenue vide its letter dated 1st August, 2002
wherein it was clarified as under:
‘Storage and warehousing service for all kind of goods are
provided by public warehouses, private warehouses, by agencies such as the
Central Warehousing Corporation, Airport Authorities, Railways, Inland
Container Depots, Container Freight Station, storage godown and tankers
operated by private individuals etc. The storage and warehousing service
provider normally makes arrangement for space to keep the goods, loading,
unloading and stacking of goods in the storage area, keeps inventory of goods,
makes security arrangements and provides insurance cover etc. Service provided
in ports has already been covered under the category of port service.’
It can be noticed that the Government was of the view that
the service of storage and warehousing as provided by the ports were covered
under the category of port services. If that be so, now it is not open to
revenue to submit that for the period 16th August, 2002 to 30th June, 2003 the
services were vivisectable and chargeable to the service tax as storage and
warehousing services and subsequently they would be covered under the category
of port services. It is settled law that there has to be finality in taxation
matters and the revenue cannot shift its stand.
The two members of the Tribunal deferred on above
conclusion. The matter was forwarded to the third member. The learned third
member referred to various decisions of various courts and Tribunal. Few
important decisions of the House of Lords relied by the appellant were quoted
as under:
House of Lords Judgment in the case of Card Protection
Plan Ltd vs. CCE reported in 2001 UKHL 4 wherein the House of Lords had to
determine the taxability of the services provided along with the insurance
service under the UK VAT Act. The Court has to determine as to whether the
services provided along with the insurance service will be treated separately
and would be liable to VAT or will it form a part of insurance service
provided by the Card Protection Plan Ltd. The House of Lords held that the
service which comprises a single service from an economic point of view should
not be artificially split up. The Court held that services must be regarded as
ancillary to the principle services if it does constitute for customer an aim
in itself, but a mean of better enjoying the principle services provided. The
extract of the relevant part of the judgment is as under:
"The court further held that in deciding whether a
transaction which comprises several elements is to be regarded as a single
supply or as two or more distinct supplies to be assessed separately, regard
must first be had to all the circumstances in which that transaction takes
place, taking into account:
First, that it follows from article 2(1) of the Sixth
Directive that every supply of service must normally be regarded as distinct
and independent and, secondly, that a supply which comprises a single service
from an economic point of view should not be artificially split, so as not to
distort the functioning of the VAT system, the essential features of the
transaction must be ascertained in order to determine whether the taxable
person is supplying the customer, being a typical customer, with several
distinct principal services or with a single service.
There is a single supply in particular in cases where one
or more elements are to be regarded as constituting the principal service,
whilst one or more elements are to be regarded, by contrast, as ancillary
services which share the tax treatment of the principle service. A service
must be regarded as ancillary to a principal service if it does not constitute
for customers an aim in itself, but a means of better enjoying the principal
service supplied."
The law laid down in this case was again followed by the
House of Lords in case of College of Estate Management v Her Majesty’s
Commissioners of Customs and Excise reported in 2005 UKHL 62, wherein
House of Lords held that the supply of books is ancillary to the education
services being provided to the students. Therefore, the supply of the books
will not be treated as an independent activity rather it is ancillary to the
principle service of education.
The appellants were registered w.e.f. 1-7-2003 and they
also started paying tax as minor port with effect from that date. The
definition of storage and warehousing keeper did not undergo any change w.e.f
1-7-2003, thus indicating that the two services were distinct and separate
services and inasmuch as the appellants was accepted as port, when
registration was granted without any objection by the Revenue authority, he
cannot be held to be a storage and warehousing keeper for the period prior to
1-7-2003.
Gujarat Chem. Port Terminal Co. Ltd. vs. CCE Vadodara 9 STR
386 (Tri - Ahmd)
