2025-VIL-49-KAR-ST
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SERVICE TAX High Court Cases

Service Tax - Composite indivisible Works Contract – Petitioner is engaged in the business of retreading tyre discharged VAT on 70% of the turnover, being the value of the deemed sale component and discharges Service Tax on 30% of the turnover being the value of the service provided - Dept seeking to levy service tax on the entire turnover of the value of the service provided by the petitioner - Whether service tax is leviable on the entire turnover of the petitioner or only on the service component after excluding the value of the materials/deemed sale component which is subjected to VAT - HELD - The petitioner has 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 said amounts by classifying the same accordingly - the Supreme Court in the case of Safety Retreading Company (P) Ltd., held that the Service tax can only be levied on the service component and not on the entire value of the contract. The portion of the contract relating to the value of deemed sale as assessed and taxed by the State to sales tax/VAT is conclusive and the same cannot be subjected to tax by the Union of India as service tax - the contention of the Revenue that there is a change in the legal position subsequent to 1.7.2012 having regard to the issuance of the Notification dated 20.6.2012 is also untenable as the Supreme Court's judgment in Safety Retreading Company (P) Ltd. has categorically held that the Service tax can only be levied on the service component. The Notification dated 20.6.2012 which is applicable to the transactions after 1.7.2012, does not in any manner alter the said position. The said notification merely alters the definition of what is defined as ‘service’ - 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 said amounts by classifying the same accordingly, the question of the respondent authorities seeking to levy service tax on the entire value mentioned in the invoices does not arise - the impugned orders-in-original levying service tax on the entire turnover of the petitioner are quashed - The writ petitions are partly allowed
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