The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no service tax is chargeable on the warranty labour charges for providing free after-sale service.
The bench of Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that service tax is payable on “free services‟ provided by the appellant during the warranty period for sale of cars.
The issue in the present appeal is whether service tax is payable on “free services‟ provided by the appellant during the warranty period for sale of cars. The appellant is an authorised dealer of Maruti Udhyog Ltd. and are providing services at authorised service stations.
Show cause notice was issued to the appellant on the allegation that in respect of the “free services” provided by the assessee to the customers during the warranty period, they had already received warranty labour charges from Maruti Udhyog Ltd. at the time of purchase of the vehicle, and therefore, for the purpose of assessment of service tax, these free services do not remain free. Since the charges for the “free services” during the warranty period have been realised by the assessee, they are required to pay service tax on the value of such charges.
On adjudication, demand in the show cause notice was confirmed along with interest and penalty under Section 76 of the Finance Act, 1994. The Commissioner (Appeals) by the impugned order rejected the appeal holding that the appellant liable to pay service tax on the services provided to the customers as the amount against the said taxable value has been received by the appellant in the margin amount at the time of selling the vehicle and prior to the performance of the free services.
The tribunal while allowing the appeal held that the “free services‟ said to have been rendered by the appellant to the purchaser of the vehicle is not really free. The value of such services are already included in the price of the vehicle paid by the customers. The value has also been included for the purpose of paying excise duty and sales tax.
Case Details
Case Title: M/s. K.P. Automotives Pvt. Ltd. Versus Commissioner
Case No.: Service Tax Appeal No.52244 of 2019
Date: 11.07.2025
Counsel For Appellant: Alok Kumar Kothari
Counsel For Respondent: Shashank Yadav
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