In CCE, Eranakulam v. M/s Sai Service Station Ltd, a division bench of the Kerala High Court held that a dealer engaged in exchanging old cars for new ones is not liable to pay Service Tax for such activity since the same would not amount to Business Auxiliary Service” under the Finance Act, 1994.
The appellant-departments case was that the exchange of old cars for new ones amounts to business auxiliary service and the difference between the sale price for the old cars and the purchased price of the new ones has to be treated as remuneration for the service rendered by the assessees, M/s Sai Service Station Ltd and M/s Indus Motors Co.
On appeal, the Appellate Tribunal quashed the demand order finding the transaction totally a purchase and sale of old vehicles. It said that the dealer refurbishing, repairing the vehicle as its owner is not a service rendered by it to any other person.
A bench comprising Justice Antony Dominic and Justice Dama Seshadri Naidu noted that the sale of a motor vehicle is governed by the Sale of Good Act, and its use by the Motor Vehicles Act. Further, the selling price of the used car includes the cost of the used car, the refurbishment charges, the management fee, free service and warranty, besides business margin.
Aligning with the findings of the Tribunal, the bench observed that the transaction is in part exchange.
“The used-car owner gets a new car and pays the balance price. He signs Forms 29 and 39 in blank and leaves the scene for good—literally. He has no concern how the dealer repairs or refurbishes the car, he has no concern how the dealer displays his wares—the car—and he has no concern what price the used-car fetches. The dealer’s not getting the vehicle registered in his name or having the transfer of entry in the road transport registers does not sound the death knell of the transaction so long as the dealer does not intend to use the motor vehicle in “public or other place,” it said.
Read the full text of the Judgment below.
