Customs, Excise and Gold Tribunal - Calcutta
Asl Motors Pvt. Ltd. vs Commr. Of Central Excise, Customs And ... on 21 November, 2007
Equivalent citations: [2008]13STJ244(CESTAT-KOLKATA), 2008[9]S.T.R.356, (2008)12VST265(CESTAT-KOL)
ORDER Chittaranjan Satapathy, Member (T)
1. Heard both sides. 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. Shri Amalendu Chakraborty, ld. Consultant appearing for the appellants states that 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 sold by them. He states that the Ministry issued a Circular No. 62/11/2003 dated 21.8.2003 under which it was clarified that if the value of service provided free of charges is zero, the tax will also be zero even though the service is taxable. He further states that under Circular No. 28/2006-Cus dated 6.11.2006, it was clarified as under:
3. As regards 'free servicing' (where the customer does not pay any charges) of the motor vehicles, normally the service charges are reimbursement by the vehicle manufacturers, who promises such a facility to attract customer. As the law does not in any way restrict the levy of service tax only on the service charges received from the recipient of the service, therefore, such reimbursements are subject to service tax.
Shri Amalendu Chakraborty, ld. Consultant states that it is an admitted fact that in the case of the appellants, there was no reimbursement by the manufacturers. He, however, fairly states that the dealers' margin available to the appellants is adequate to meet the expenses towards free servicing but since the full value including the dealers' margin is recovered from the customer towards sale price of the cars and sales tax is paid thereon, no service tax can be charged either on the amount representing the dealers' margin or on a part of it.
1.1. Shri Chakraborty further states that there are several dealers of automobile manufacturers in the country and the sales pattern is the same, as also the pattern 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. v. CCE., Trivandrum reported in 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 Gujarat Ambuja Cements Ltd. v. UOI 2005 (67) RLT 469 (SC), 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.
2. We have heard the ld. JDR for the Revenue who supports the order passed by the authorities below.
3. We find that the Ministry in its Circular No. 28/2006-Cus dated 6.11.06 has clarified that where service charges are reimbursed by the vehicle manufacturers, such reimbursement should be subjected to service tax. However, it is well-known that free servicing is normally provided by the dealers in the vehicle trade meeting the expenses from the dealers' margin, yet the Ministry has chosen to keep silent regarding taxability of such free servicing provided by the dealers for which no reimbursements are made by the vehicle manufacturers. It appears to us that such silence about the dominant practice of providing free servicing has resulted in some field officials taking unilateral action as in this case while majority of the dealers are not taxed on free servicing provided by them.
4. We also find 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 sale 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. Consequently, we set aside the impugned order and allow the appeal.
Pronounced in the open Court on 21.11.07.