M/S.Tyresoles (India) Pvt. Ltd., Vs the Union of India

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF MANDAMUS/CERTIORARI OR ANY OTHER SUCH WRIT, ORDER OR DIRECTION AS THIS HON’BLE COURT MAY DEEM FIT QUASHING THE IMPUGNED ORDER-IN-ORIGINAL NO.BEL-EXCUS-000-COM-BKK-0062018-19(ST) PASSED ON 23.10.2018 AND ISSUED ON 05.11.2018 BY RESPONDENT NO.3 (ANNEXUE-"A") AS BEING IN ABUSE OF JURISDICTION, WHOLLY ARBITRARY, ILLEGAL AND UNTENABLE IN LAW, AS WELL AS BEING IN VIOLATION OF ARTICLES 14, 19(1)(g) AND 141 OF THE CONSTITUTION OF INDIA AND ETC.

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IN W.P.NO.108984 OF 2015

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BETWEEN

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M/S TYRESOLES INDIA PVT., LTD., KAKATI INDUSTRIAL AREA, KAKATI, BELAGAVI-591113 REPRESENTED BY ITS GENERAL MANAGER ACCOUNTS

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...PETITIONER

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(BY SRI. SATISH L KARALE, SRI. ANIRUDHA R J NAYAK AND SRI. ARAVIND D KULKARNI ADVOVCATES)

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AND

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1 . THE UNION OF INDIA R/BY ITS SECRETARY MINISTRY OF FINANCE, NORTH BLOCK, NEW DELHI

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2 . THE MINISTRY OF FINANCE GOVERNMENT OF INDIA, R/BY ITS SECRETARY MF (DR), NEW DELHI.

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3 . THE COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX C R BUILDINGS, NO. 71, CLUB ROAD, BELAGAVI-590005

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…RESPONDENTS

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(BY SRI.MRUTYUNJAY TATA BANGI, ADVOCATE FOR R1 TO R3

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SRI. SHIVARAJ S BALLOLLI, ADVOCATE FOR R1 TO R3 SRI. K. B. NAVALAGIMATH, ADVOCATE FOR R1 & R2)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF CERTIORARI OR ANY OTHER WRIT, ORDER OR DIRECTION AS THIS HON'BLE COURT MAY DEEM FIT AND PROPER, QUASHING ORDERSIN-ORIGINAL NOS.BEL-EXCUS-000-COM-BHR-7 (ST)-15-16 DATED:04.06.2015 OF RESPONDENT NO.3 ANNEXURE-B AS BEING AS BEING WITHOUT JURISDICTION AND THUS ILLEGAL AND UNTENABLE IN LAW AND ETC.

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IN W.P.NO.102040 OF 2017

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BETWEEN

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M/S TYRESOLES (INDIA) PVT. LTD., PLOT NO: 35 AND 36, KAKATI INDUSTRIAL ESTATE, BELAGAVI-591113, REPRESENTED BY ITS VICE PRESIDENT SHRI SHIVANAND GOPALL PATIL, AGE 44, R/O: BELAGVI

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...PETITIONER

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(BY SRI. ANIRUDHA R J NAYAK, SMT/SRI. YOVINI RAJESH KOHRA, SRI. T V AJAYAN AND SRI. ARAVIND D KULKARNI, ADVOCATES)

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AND

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1 . THE UNION OF INDIA REPRESENTED BY ITS SECRETARY, MINISTRY OF FINANCE, NORTH BLOCK, NEW DELHI

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2 . THE MINISTRY OF FINANCE GOVERNMENT OF INDIA,

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REP BY ITS SECRETARY MF (DR) NEW DELHI-110011

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3 . THE COMMISSIONER OF

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CENTRAL EXCISE and SERVICE TAX C R BUILDINGS, NO.71, CLUB ROAD BELGAUM-590005

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THE ASSISTANT COMMISSIONER OF CENTRAL

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EXCISE AND SERVICE TAX, C R BUILDINGS, NO.71, CLUB ROAD, BELGAUM-590005

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… RESPONDENTS

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(BY SRI. M B KANAVI, ADVOCATE FOR R1 AND R2 SRI. JEEVAN J NEERALAGI, ADVOCATE FOR R3 AND R4)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF CERTIORARI OR ANY OTHER WRIT, ORDER OR DIRECTION AS THIS HON'BLE COURT MAY DEEM FIT AND PROPER, QUASHING ORDERSIN-ORIGINAL NOS.BEL-EXCUS-000-COM-BKK-026-2016-17(ST) DATED:29.11.2016, VIDE ANNEXURE-H, BEL/ EXCUS/000/DIV1/ ASC/KKM/83/2016-17-ST DATED:28.12.2016 VIDE ANNEXURE-J AND BEL/ EXCUS/000/DIV1/ ASC/KKM/84/2016-17-ST DATED:28.12.2016 ANNEXURE-K AS BEING AS BEING WITHOUT JURISDICTION AND THUS ILLEGAL AND UNTENABLE IN LAW AND ETC.

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THESE PETITIONS HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 19.12.2024 COMING ON FOR 'PRONOUNCEMENT OF ORDER' THIS DAY, THE COURT MADE THE FOLLOWING:-

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CORAM: HON'BLE MR JUSTICE C.M. POONACHA

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CAV ORDER

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W.P.No.102458/2019 is filed seeking for the following

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reliefs:

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“(a) Issue a writ of mandamus/certiorari or any other such writ order or direction as this Hon’ble Court may deem it fit quashing the impugned Order-In-Original NO.BEL-EXCUS000-COM-BKK-006-2018-19 (ST) passed on 23.10.2018 and issued on 05.11.2018 by respondent No.3 (Annexure-‘A’) as being in abuse of jurisdiction, wholly arbitrary, illegal and untenable in law, as well as being in violation of Articles 14, 19(1)(g) and 141 of the Constitution of India.

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(b) Issue a writ of mandamus, or any other such writ order or direction, holding and declaring that the provisions of Section 35F of

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the Central Excise Act, 1944 is wholly arbitrary, ultra-vires and violative of Article 14 of the constitution and thus unenforceable.

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(c) In the alternative, and without prejudice to the foregoing reliefs prayed for; issue a writ of mandamus or any other such writ, order or direction as this Hon’ble Court may deem fit dispensing with the requirement to pre-deposit of 7.5% (ten percent) of the demand of tax made under the order-in-original NO.BELEXCUS-000-COM-BKK-006-2018 19 (ST) passed on 23.10.2018 and issued on 05.11.2018 by respondent No.3 (Annexure-‘A’) otherwise required to be made under the provisions of Section 83 of the Finance Act, 1994, read with Section 35F of the Central Excise Act 1944, should this Hon’ble Court, in the facts and circumstances of the case deem it fit and proper that the petitioner ought to prefer an appeal before the Hon’ble Customs Excise and Service Tax Appellate Tribunal, against the Order-In-Original No.BEL-EXCUS000-COM-BKK-006-2018-19 (ST) passed on 23.10.2018 and issued on 05.11.2018 (Annexure-‘A’).”

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W.P.No.108984/2015 is filed seeking for following

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reliefs:

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“(a) Issue a writ of certiorari, or any other writ, order or direction as this Hon’ble Court may deem fit and proper, quashing order -in-original in No.BEL-EXCUS-000-COM-BHR-07(ST)-15-16 dated 04.06.2015 of respondent no.3 Annexure-B as being without jurisdiction and thus illegal and untenable in law.

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(b) To hold that section 35F of the Central Excise Act, 1944 is arbitrary and therefore ultra vires Section 86 of the FA.

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(c) To pass such other orders, directions and writs as this Hon’ble High Court may deem fit in the facts and circumstances of the case, and in

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the interests of justice, including the cross of this writ petition.”

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W.P.No.102040/2017 is filed seeking for following

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reliefs:

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“(a) Issue a writ of certiorari or any other order of direction as this Hon'ble Court may deem fit and proper, by quashing orders in original Nos.BEL-EXCUS-000-COM-BKK-026-201617(ST) dated 29.11.2016 vide Annexure-H, BEL/ EXCUS/ 000/DIV1/ ASC/KKM/83/2016–17 ST dated 28.12.2016 in Annexure-J & BEL/ EXCUS/ 000/DIV1/ ASC/KKM/84/2016–17 ST dated 28.12.2016 vide Annexure-K as being without jurisdiction and thus illegal and untenable in law.

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(b)To issue a writ of mandamus or any other directing the CESTAT/Commissioner (Appeals) to hear their appeals without insisting on predeposit of any tax.

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(c) To hold that section 35F of the Central Excise Act, 1944 is arbitrary and therefore ultra vires Section 86 of the Finance Act.

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(d) To pass such other orders, directions as this Hon’ble High Court may deem fit in the facts and circumstances of the case, and in the interest of justice, including the costs of this writ petition.”

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4. At the outset, during the course of hearing it is

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relevant to place on record that learned Senior Counsel Sri. Rajesh Chander Kumar appearing for the petitioners submitted that the petitioners in the aforementioned writ petitions do not press prayer No.(b) made in W.P.No.102458/2019 and

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W.P.No.108984/2015 and prayer No.(c) made in W.P.No.102040/2017 with regard to the challenge to Section 35F of the Central and Excise Act, 1944, as being arbitrary. Hence, the contention of the petitioners regarding the same raised in the writ petitions is not been considered in this order in view of the said submission.

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The petitioner in the aforementioned writ petitions has called in question the orders-in-original passed by respondent No.3/Commissioner, the details of which are as under:

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Sl. No.	Writ Petition No.	Order-in- Original No.	Date of the order	Period
1.	W.P.102458/2019	No.6/2018-19	23.10.2018	From April-2016 to June-2017
2.	W.P.108984/2015	No.7/2015-16	03.06.2015	From April-2012 to March-2013
		No.26/2016-17	28.11.2016	April-2013 to March-2014
3.	W.P.102040/2017	No.83/2016-17	28.12.2016	From Oct-2005 to March-2006
		No.84/2016-17	28.12.2016	From April-2006 to Sept-2006

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The relevant facts in a nutshell leading to the present writ petitions are that the petitioner in the aforementioned writ petitions carries on the business of

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retreading tyres, which is a process whereby tread rubber is affixed to worn out tyres by bonding in order to reinforce them for further use. It is the case of the petitioner that the said activity involves various stages wherein the materials are procured and consumed in the process of retreading which becomes part and parcel of the retreaded tyres. That the execution of the work by the petitioner is a composite indivisible works contract.

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It is the case of the petitioner that it is registered under the provisions of the Finance Act, 1994¹ (Act of the Union of India) and the Karnataka Value Added Tax Act, 2005² (Act of the State of Karnataka). That the petitioner discharges Value Added Tax³ to the State of Karnataka on 70% of the turnover, being the value of the deemed sale component and discharges Service Tax to the Union of India on 30% of the turnover being the value of the service provided.

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The respondent authorities/Revenue have issued the impugned orders-in-original seeking to levy service tax on the entire turnover of the value of the service provided by the

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1 Hereinafter referred to as “Finance Act”

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2 Hereinafter referred to as “KVAT Act”

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3 Hereinafter referred to as “VAT”

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petitioner, which the petitioner has called in question in the present writ petitions on various grounds.

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It is forthcoming that the order-in-original No.83/2016-17 and 84/2016-17 both dated 28.12.2016 are for the period from October-2005 to March-2006 and from April2006 to September-2007. Hence, the said two orders-inoriginal pertain to the period prior to 2012. The said orders are challenged in W.P.No.102040/2017 wherein they are produced as Annexure-J to the said writ petition.

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With regard to the said orders-in-original dated 28.12.2016, it is the contention of the petitioner that the Hon’ble Supreme Court in the case of Safety Retreading Company (P) Ltd., v. Commissioner of C.EX., Salem⁴ i.e., in the petitioner’s own case having granted relief to the petitioner on a similar ground that is urged in the present petition, but for a different period and the said order of the Hon’ble Supreme Court has also been followed by the Customs Excise and Service Tax Appellate, Tribunal⁵ vide order bearing No.23255-260/17 dated 13.12.2017 (Annexure-D to W.P.No.102458/2019) as also by the High Court of Judicature

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4 2017 (48) S.T.R. 97 (SC)

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5 Hereinafter referred to as “CESTAT”

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of Bombay in Goa in the case of Tyresoles India Pvt. Ltd., v. Union of India⁶ and the said orders having become final, the relief sought for by the petitioner with regard to the said orderin-original bearing No.83-84/2016-17 dated 28.12.2016 is liable to be granted and the said orders are required to be quashed.

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It is the primary contention of the 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.

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In the said context, it is relevant to note that the Hon’ble Supreme Court in the case of Commissioner of Central Excise & Customs Kerala v. Larsen and Toubro Limited⁷ , after referring to its earlier judgment in the case of

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6 2019 (367) E.L.T. 537 (Bom.)

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7 2015 (39) S.T.R. 913 (S.C.)

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Gannon Dunkerley & Company & others v. State of

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Rajasthan & others⁸ has held as follows:

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“15. A reading of this judgment, on which counsel for the assessees heavily relied, would go to show that the separation of the value of goods contained in the execution of a works contract will have to be determined by working from the value of the entire works contract and deducting therefrom charges towards labour and services. Such deductions are stated by the Constitution Bench to be eight in number. What is important in particular is the deductions which are to be made under sub-paras (f), (g) and (h). Under each of these paras, a bifurcation has to be made by the charging Section itself so that the cost of establishment of the contractor is bifurcated into what is relatable to supply of labour and services. Similarly, all other expenses have also to be bifurcated insofar as they are relatable to supply of labour and services, and the same goes for the profit that is earned by the contractor. These deductions are ordinarily to be made from the contractor’s accounts. However, if it is found that contractors have not maintained proper accounts, or their accounts are found to be not worthy of credence, it is left to the legislature to prescribe a formula on the basis of a fixed percentage of the value of the entire works contract as relatable to the labour and service element of it. This judgment, therefore, clearly and unmistakably holds that unless the splitting of an indivisible works contract is done taking into account the eight heads of deduction, the charge to tax that would be made would otherwise contain, apart from other things, the entire cost of establishment, other expenses, and profit earned by the contractor and would transgress into forbidden territory namely into such portion of such cost, expenses and profit as would be attributable in the works contract to the transfer of property in goods in such contract. This being the case, we feel that the learned counsel for the assessees are on firm ground when they state that the service tax charging section itself must lay down with specificity that the levy of service tax can only be on works contracts, and the

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8 (1993) 1 SCC 364

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measure of tax can only be on that portion of works contracts which contain a service element which is to be derived from the gross amount charged for the works contract less the value of property in goods transferred in the execution of the works contract. This not having been done by the Finance Act, 1994, it is clear that any charge to tax under the five heads in Section 65(105) noticed above would only be of service contracts simpliciter and not composite indivisible works contracts.

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16. At this stage, it is important to note the scheme of taxation under our Constitution. In the lists contained in the 7th Schedule to the Constitution, taxation entries are to be found only in lists I and II. This is for the reason that in our Constitutional scheme, taxation powers of the Centre and the States are mutually exclusive. There is no concurrent power of taxation. This being the case, the moment the levy contained in a taxing statute transgresses into a prohibited exclusive field, it is liable to be struck down. In the present case, the dichotomy is between sales tax leviable by the States and service tax leviable by the Centre. When it comes to composite indivisible works contracts, such contracts can be taxed by Parliament as well as State legislatures. Parliament can only tax the service element contained in these contracts, and the States can only tax the transfer of property in goods element contained in these contracts. Thus, it becomes very important to segregate the two elements completely for if some element of transfer of property in goods remains when a service tax is levied, the said levy would be found to be constitutionally infirm. ……..”

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(emphasis supplied)

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It is clear from the same that 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.

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At this stage, it is relevant to notice that the petitioner has furnished the copies of the tax invoices that have been maintained by it, which has been submitted to the Revenue wherein the petitioner has clearly stipulated the value of the VAT of 5.5% on the materials (which is levied by the State) and service tax of 14% on labour charges (which is levied by the Union). The said invoices clearly stipulates the portion of the amount collected as material charge and the portion of the amount collected as labour charges.

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It is also relevant to note that the petitioner has submitted these invoices to the Taxation Authorities in the State and the State of Karnataka has passed reassessment orders under the KVAT Act on the said basis.

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It is also relevant to note that in the order-inoriginal bearing No.6/2018-19 dated 23.10.2018 that the Commissioner has held as follows:

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“However, it is a fact that items like tread rubber, patches, bonding gum are utilized for re-treading the tyres. In other words, these materials are consumed in the rendering of tyre re-treading services, and there is no sale of these materials to the customers. No customer would come to a retreading-service provider for the purpose of the buying material like tread rubber, patches, bonding gum etc., and the customer are interested only in the treading of tyres. It is also not the case of the noticee that they are providing treading

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service to a company under a job work and that company is providing the raw material as free supplies to the noticee. Therefore, I am of considered view that there is no sale of material to the customers except consumption of these materials during the course of rendering the impugned service by the noticee. I accordingly hold that the impugned activity cannot come under ‘works contract’.”

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(emphasis supplied)

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16.1 Thereafter, in the operative portion of the order, at

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paragraph 2, it is stated as follows:

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“ (ii) I confirm and order for recovery of the differential Service Tax of Rs.4,31,67,951/- (Rupees Four Crores Thirty One Lakhs Sixty Seven Thousand Nine Hundred and fifty one only) (inclusive of cesses), under “Works Contract Service” under section 65B(54), under Section 73(1) of the Finance Act, 1994”

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(emphasis supplied)

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Hence, it is clear that the Commissioner at paragraph 23 has recorded a finding that the activity of the petitioner does not come under “works contract”. However, while confirming the order for recovery of the differential services tax, the commissioner has levied the same under “works contract” under Section 65-B (54) under Section 73(1) of the Finance Act.

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It is clear from the aforementioned that the order passed by the Commissioner is ex-facie untenable as being mutually contradictory, as has been noticed above.

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It is relevant to note that the Hon’ble Supreme Court vide order dated 18.01.2017 passed in Civil Appeal No.641/2012 in the case of Safety Retreading Company (P) Ltd³ has also considered Civil Appeal No.6375-6376/2014 in the petitioner’s own case. In the said case, the matter having been decided against the petitioner/assessee before CESTAT, the Hon’ble Supreme Court was considering a challenge made by the petitioner. In the said case, the order of the CESTAT has been noticed as follows:

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“7. A demand for levy of tax on the gross value of the service rendered including the cost of materials used and transferred was raised and answered against the assessee leading to an appeal before the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Chennai (hereinafter referred to as “appellate Tribunal”). The learned appellate Tribunal returned a split verdict with the Technical Member taking the view that the gross value of the service rendered would be exigible to tax under the Act. The third member (Technical) to whom the matter was referred held as follows:

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“21. From the foregoing, the following emerges:

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a) There is no evidence of sale of materials in rendering the impugned service of “Maintenance and Repairs”.

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b) “Maintenance and Repair Service” being as specific service cannot be treated as service under the category of “Works Contract” for the service tax purposes.

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c) The concept of “deemed sales” is relevant only in respect of services under the category of “Works Contract” and not in

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respect of “Maintenance and Repair Service”.

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d) The assessee has not proved that the conditions under Notification 12/03 ST dated 20.06.2003 have been satisfied and, therefore, they are not entitled to the benefit of deduction of cost of raw materials consumed in providing the impugned service.”

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19.1 Considering the same, the Hon’ble Supreme Court

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held as follows:

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“10. The exigibility of the component of the gross turnover of the assessee to service tax in respect of which the assessee had paid taxes under the local Act whereunder it was registered as a Works Contractor, would no longer be in doubt in view of the clear provisions of Section 67 of the Finance Act, 1994, as amended, which deals with the valuation of taxable services for charging service tax and specifically excludes the costs of parts or other material, if any, sold (deemed sale) to the customer while providing maintenance or repair service. This, in fact, is what is provided by the Notification dated 20^th June, 2003 and CBEC Circular dated 7^th April, 2004, extracted above, subject, however, to the condition that adequate and satisfactory proof in this regard is forthcoming from the assessee. On the very face of the language used in Section 67 of the Finance Act, 1994 we cannot subscribe to the view held by the Majority in the appellate Tribunal that in a contract of the kind under consideration there is no sale or deemed sale of the parts or other materials used in the execution of the contract of repairs and maintenance. The finding of the appellate Tribunal that it is the entire of the gross value of the service rendered that is liable to service tax, in our considered view, does not lay down the correct proposition of law which, according to us, is that an assessee is liable to pay tax only on the service component which under the State Act has been quantified at 30%.

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12. No dispute has been raised with regard to the assessment of the appellant on its turnover under the

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local/State Act, insofar as payment of value added tax on that component (70%) is concerned. A reading of the show cause notice dated 24^th January, 2008 would go to show that the entire thrust of the Department's case is the alleged liability of the appellant – assessee to pay service tax on the gross value. In the aforesaid show cause notice, the details of the value of the goods, raw materials, parts, etc. and the value of the services rendered have been mentioned and service tax has been sought to be levied at the prescribed rate of ten per cent (10%) on the differential amount. It is now stated before us that the aforesaid figures have been furnished by the assessee himself and, therefore, must be understood not to be authentic. This, indeed, is strange. No dispute has been raised with regard to the correctness of the said figures furnished by the assessee in the show cause notice issued to justify the stand now taken before this Court; at no point of time such a plea had been advanced.

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13. Besides the above, the affidavit of the learned Commissioner, referred to above, proceeds on the basis that the appellant assessee is also liable to pay service tax on the remaining seventy per cent (70%) towards material costs in addition to the 30% of the retreading charges. This is clear from the following averments made in the said affidavit of the learned Commissioner:

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“The relevant bills showed that the Appellant had paid service tax only on the labour component after deducting 70% towards material cost on the gross tyre Retreading charges billed and received for the period from 16.06.2005. In short, they have paid service tax only on the 30% of the tyre Retreading charges received from the customers, by conveniently omitting 70% of the consideration received towards Retreading charges to avoid tax burden.

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The verification of invoices of the Appellant for the period from Jan-2007 to March-2007, the officers noticed that the Appellant have shown material cost, patch cost and misc. charges i.e. Labour charges separately in their invoices. However, on the follow-up action the customers of the Appellant revealed that they have neither purchased nor received raw materials intended for Retreading

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and they had paid only the Retreading charges for carrying out the Retreading activity.”

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The invoices which the appellant assessee has also brought on record by way of illustration show the break up of the gross value received. There is again no contest to the same. Leaving aside the question that the case now projected, with regard to lack of proof of incurring of expenses on goods and materials which has been transferred to the recipient of the service provided, appears to be an afterthought, even on examination of the same on merits we have found it to be wholly unsustainable.

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14. We, therefore, in the light of what has been discussed above, set aside the majority order of the appellate Tribunal dated 14^th October, 2011 and hold that the view taken by the learned Vice President of the appellate Tribunal is correct and the same will now govern the parties. All reliefs that may be due to the appellant – assessee will be afforded to it forthwith and without any delay. All amounts, as may have been, deposited pursuant to the order(s) of this Court shall be returned forthwith to the appellant, however, without any interest. Bank guarantee furnished insofar as the penalty amount is concerned shall stand discharged.

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The appeal is allowed in the above terms.”

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(emphasis supplied)

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It is clear from the said judgment that the Hon'ble Supreme Court has authoritatively pronounced that the petitioner/assessee is liable to pay the service tax only with respect to the service component under the State Act. The Hon'ble Supreme Court has specifically set aside the finding of the Appellate Tribunal that the entire gross value of the service rendered is liable to service tax.

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It is the vehement contention of the Revenue that the present writ petitions are not maintainable and that the petitioner has an alternative remedy of an appeal before the Appellate Authority. It is further contended by the Revenue that the present case covering the period from April 2012 to June 2016, changes have been made by the Government in Service Tax vide Notification No.12/2003-ST dated 20.6.2003 which is rescinded by Notification No.34/2012-ST dated 20.6.2012 w.e.f., 1.7.2012 and that the service of retrading from 1.7.2012 is required to be considered differently under the provisions of the Finance Act.

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It is relevant to notice here that pursuant to the judgment of the Hon'ble Supreme Court in the case of Safety Retreading Company (P) Ltd³ the petitioner/assessee relied upon the same before the CESTAT in Appeal No.ST/1180/11-DB and other connected matters. The CESTAT vide Final Order bearing No.23255-260/2017, dated 13.12.2017 has categorically held that the decision of the Hon'ble Supreme Court covers the issues involved in the said appeal. However, it is relevant to note that in the said appeals the orders-inoriginal for various periods prior to 1.7.2012 were under consideration.

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It is also relevant to note that the Division Bench of

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the Bombay High Court in the case of Tyresoles India Pvt.

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Ltd., v. Union of India⁶ was also considering a challenge made by the petitioner to the order of the Commissioner, Central Excise and Service Tax, confirming the demand and penalty. In the said case, the Revenue had raised a preliminary objection regarding the maintainability of the writ petition on the ground that an alternative remedy of appeal was available. The Division Bench of the Bombay High Court, considering the said contention, rejected the same by holding that Rule had been issued in the writ petitions and having regard to the fact that the issue that arose for consideration was squarely covered by the decision of the Hon'ble Supreme Court in the case of Safety Retreading Company (P) Ltd³ . Further, in the said case, the Division Bench has held as follows:

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“21. In the present case, the petitioner had produced documentary proof by way of Cost Accountant's certificate, clearly indicating the details and value of the goods and materials which formed the subject matter of sale/deemed sale. Further, in this case, the petitioner had produced on record documentary proof that sale/deemed sale component corresponding to 70% of the gross value, the petitioner was in fact assessed to and levied sale tax/VAT to the local Sales Tax/VAT Authorities. The petitioner also adduced documentary proof regarding payment of such local sales tax/VAT to the State Authorities. As regards this position, in fact, there is no dispute whatsoever. Rather, express cognizance of this

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aspect has been taken by the Commissioner in paragraph 37 of the impugned order dated 14 October, 2016. In such circumstances, therefore, there was absolutely no justification on the part of the Commissioner in denying the petitioner the benefit of exemption dated 20 June, 2003.

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22. Incidentally, it is necessary to note that the contention very similar to the one now raised by Ms. Dessai, was also raised before the Hon'ble Apex Court in the case of Safety Retreading Co. (P) Ltd. (supra). There, the Learned Additional Solicitor General of India had contended that there was no evidence forthcoming from the assessee that the value of goods or the parts used in the contract and sold to the customers amount to 70% of the value of the service rendered which is the taxable component under the State Act. The Hon'ble Apex Court, however, rejected the said contention by observing that the said contention "overlooks certain basic features of the case, namely undisputed assessment of the assessee under the local Act; the case projected by the Department itself in the show cause notice; and thirdly the affidavit filed before this Court by one S. Subramanian, Commissioner of Central Excise, Salem". The Apex Court noted that no dispute whatsoever had been raised with regard to the assessment of the appellant on its turnover under the local/State Act, insofar as payment of Value Added Tax on that component (70%) is concerned. Therefore, the reasoning reflected in paragraphs 11, 12 and 13 of the decision of the Apex Court in Safety Retreading Co. (P) Ltd. (supra) is sufficient to reject Ms. Dessai's contention relating to the alleged non-compliance with the conditions of the exemption under Notification dated 20 June, 2003.

¶164

23. Mr. Rajesh Chander Kumar, the Learned Counsel for the petitioner has pointed out that for the period of disputes between April 2009 to March 2010, April 2008 to September 2008, April 2010 to July 2011, August 2011 to March 2012, October 2008 to March 2009, October 2007 to March 2008, October 2006 to September 2007, the respondents on the basis of reasoning now recorded in the impugned order dated 14 October, 2016, had required the petitioner to pay Service Tax, interest

¶165

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and penalty on the basis of the gross receipts, without giving the petitioner benefit of the Notification dated 20 June, 2003. As against such assessment order, the petitioner had instituted appeals before the CESTAT which were allowed by the CESTAT vide Judgment and Order dated 13 December, 2017, relying entirely upon the decision of the Apex Court in Safety Retreading Co. (P) Ltd. (supra). Mr. Rajesh Chander Kumar states that the Judgment and Order dated 13 December, 2017 made by the CESTAT for the aforesaid period has not been questioned by the Department. We agree that this is an additional circumstance for allowing the present petition.”

¶167

(emphasis supplied)

¶168

In the present case, the writ petitions are listed for

¶169

final hearing and there is abundant material on record to demonstrate that the issue under consideration is squarely covered by the judgment of the Hon'ble Supreme Court in the case of Safety Retreading Company (P) Ltd³ . Hence, the contention of alternative remedy raised by the Revenue is untenable and accordingly rejected.

¶170

As noticed herein above, the petitioner has furnished copies of tax invoices maintained by it, wherein the petitioner has indicated the value of the material and labour charges separately and as also indicated that in respect of the value of the materials the tax has been paid to State Government and with respect to the value of the labour charges the service tax has been paid to the Union Government. The said invoices have also been submitted to the tax authorities in

¶171

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the State Government and the State has passed re-assessment orders under KVAT Act.

¶173

It is further relevant to note here that a similar fact situation was considered by the Hon'ble Supreme Court in the case of Safety Retreading Company (P) Ltd³ as also by a Division Bench of the Bombay High Court in the case of Tyresoles India Pvt. Ltd.,⁶ . The Hon'ble Supreme Court, as noticed above has clearly held that no dispute has been raised in the show cause notice (as in the present case also) with regard to the correctness of the figures furnished by the petitioner and at no point of time the respondents raised a plea as to the correctness of the invoices. The Division Bench of the Bombay High Court has also noticed a similar factual circumstance and relying upon the judgment of the Hon'ble Supreme Court in the case of Safety Retreading Company (P) Ltd³ , held that the Revenue did not dispute the invoices furnished. In the present case also, the respondents have not denied the correctness of the said bifurcation of the amounts made by the petitioner/assessee. Hence, the same is required to be accepted in the present case also.

¶174

Further, the contention of the Revenue that there is a change in the legal position subsequent to 1.7.2012 having

¶175

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regard to the issuance of the Notification dated 20.6.2012, is also untenable and liable to be rejected in view of the fact that

¶177

the Hon'ble Supreme Court in the case of Safety Retreading Company (P) Ltd³ has categorically 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. Hence, 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 only alters the definition of what is defined as ‘service’.

¶178

In the present case, 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.

¶179

In view of the discussion made above, the reliefs sought for by the petitioners are required to be granted.

¶180

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30. Hence, the following:

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ORDER

¶183

i. The writ petitions are partly allowed;

¶184

ii. The orders in original bearing (1) No.6/2018-19, dated 23.10.2018 for the period from April 2016 to June 2017; (2) No.7/2015-16, dated 3.6.2015 for the period from April 2012 to March 2013; (3) No.26/2016-17, dated 28.11.2016, for the period from April 2013 to March 2014; (4) 83/2016-17, dated 28.12.2016, for the period from October 2005 to March 2006; and (5) No.84/2016-17, dated 28.12.2016, for the period from April 2006 to September 2006, are hereby quashed.

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Sd/(C.M.POONACHA) JUDGE

¶186

YAN/pmp/nd

M/S.Tyresoles (India) Pvt. Ltd., v. the Union of India

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M/S.Tyresoles (India) Pvt. Ltd., v. the Union of India

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