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SC : Service-tax applicable on 'service' component in retreading of tyres, not gross consideration

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  • SC holds that in a contract for retreading of tyres, service tax is payable only on service component and not on entire gross value, accordingly assessee is liable to pay on 30% of retreading charges as quantified under the State Act;
  • Referring to Section 67 of Finance Act which deals with valuation of taxable services for charging service tax, Notification No.12/2003-ST and CBEC Circular dated April 7, 2004, SC states that costs of parts or other material, if any, sold (deemed to be sold) to the customer while providing maintenance or repair service is specifically excluded;
  • Rejects majority view of the CESTAT that in retreading of tyre, there is no sale or deemed sale of the parts or other materials used in the execution of the contract of repairs and maintenance and hence, entire gross value is liable to service tax;
  • Also rejects Revenue contention that there is 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 constitute 70% of the value of the service rendered; States that no dispute has been raised with regard to the assessment of assessee on its turnover under the local/State Act, insofar as payment of VAT on that 70% component is concerned : SC
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Guest Sunday, 23 July 2017

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