The Karnataka High Court has held that the service tax cannot be levied on the entire value mentioned in invoices.
The bench of Justice C.M. Poonacha has relied on the decision of the Supreme Court in the case of Safety Retreading Company (P) Ltd., v. Commissioner of C.EX., Salem in which it was held that the Service tax sought to be levied by the respondent – Union on the entire gross value of service rendered is untenable and that the assessee is liable to pay the service tax only on the service component under the State Act.
The petitioner/assessee is in the business of retreading tyres, which is a process by which tread rubber is affixed to worn out tyres by bonding in order to reinforce them for further use.
The petitioner submitted that the activity involves various stages in which the materials are procured and consumed in the process of retreading which becomes part and parcel of the retreaded tyres. The execution of the work by the petitioner is a composite indivisible works contract.
The department has issued the impugned orders-in-original seeking to levy service tax on the entire turnover of the value of the service provided by the petitioner.
The assessee contended that petitioners/assessee that VAT having been discharged, the demand of the respondents/revenue of service tax on the same value, on the ground that notwithstanding the tax paid to the State, service tax also ought to be paid to the Union as such goods consumed in retreading are not sales, is ex-facie untenable and that the revenue/Union of India cannot tax a component of a deemed sale, which is within the exclusive domain of the State Legislature and falls in Entry 54 of List-II of the Schedule-VII of the Constitution of India.
The court held that the petitioner having clearly bifurcated the amounts in invoices with respect to the amounts incurred towards material charges as also the amounts towards service charges and tax having been paid in respect of both the amounts by classifying the same accordingly, the question of the department seeking to levy service tax on the entire value mentioned in the invoices does not arise.
Case Details
Case Title: M/S.Tyresoles (India) Pvt. Ltd. Versus The Union Of India
Case No.: Writ Petition No.102458 Of 2019 (T-RES)
Date: 10th Day Of January, 2025
Counsel For Petitioner: Rajesh Chander Kumar
Counsel For Respondent: Shivaraj S Ballolli
