Valuation -Cost of spare parts sold by an Authorised Service Station, whether as sale simplicitor or under the composite contract, is not to be included in taxable value, if sale price of sales tax/Vat is separately shown

Facts:

The Appellant, an authorised service agent for Hyundai Motor cars undertook maintenance/service of motor cars. It also supplied spare parts of these vehicles. During the course of scrutiny of the records, it was noticed that the Appellant was selling spare parts for motor vehicles during the course of providing repair services on which it was paying VAT. However, the value of these spare parts was not included in the consideration received for repair services and Service tax liability was not discharged on the value of such spare parts.

The department demanded Service tax on sales portion on the grounds that, any goods used in the course of providing service has to betreated as inputs used for providing the service and accordingly, the cost of such inputs formed integral part of the value of taxable service.

Held:

The Tribunal held that if a transaction involves only sale of spare parts, the question of levying Service tax would not arise at all. It further held that, even in a case of composite transaction involving sale of goods and rendering of service, if the bill/invoice issued clearly showspayment of Sales tax/VAT on the spare parts, then the value of such spare parts would not be included in the gross consideration for theservice