In Service Tax Appeal No.40501 of 2014 -CESTAT- CESTAT (Chennai) exempts M/s. Ford India Pvt. Ltd. from Service Tax on warranty plans prior to 01.07.2012
Members P. Dinesha (Judicial) & M. Ajit Kumar, (Technical) [08-08-2023]

Read Order: M/s. Ford India Pvt. Ltd. v. Commissioner of Customs

Chahat Varma

New Delhi, August 14, 2023: The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal has provided respite to M/s. Ford India Pvt. Ltd. (appellant), asserting that the appellant wasn't obligated to pay service tax on a range of services, including factory warranties, optional extended warranties, scheduled plans, and total maintenance plans, offered to customers prior to 01.07.2012.

Brief facts of the case were that the appellant, a car manufacturer, sold cars to authorized dealers, who then sold them to end customers. An audit revealed that the appellant had provided factory warranties to customers for two years after the car sale, followed by optional extended warranties, scheduled plans, and total maintenance plans. The tax department had noted that the appellant was directly offering services to car buyers through these plans, while dealers were only selling the plans. This led to a service tax liability, as the appellant had not reported or paid service tax on these services in their returns. This omission was seen as an attempt to evade payment, triggering the proviso to Section 73(1) of the Finance Act, 1994. Consequently, a Show Cause Notice was issued, demanding service tax, along with interest under Section 75 and a penalty under section 78 of the Finance Act, 1994.

The coram of P. Dinesha (Judicial) and M. Ajit Kumar, (Technical) observed that after the insertion of Section 65B (54) in the Finance Act 1994, from 01.07.2012 onwards, the definition of ‘works contract’ was expanded to include repair and maintenance services of movable properties also. Hence, the composite contracts for repair and maintenance of motor vehicles were leviable to service tax from 01.07.2012 onwards.

The bench held that the demand in the impugned order was for the period from 1.5.2011 to 30.6.2012. Since the bench had already concluded that the composite contracts for repair and maintenance of motor vehicles were leviable to service tax from 01.07.2012 onwards, the Tribunal concluded that these specific issues were no longer applicable.

Consequently, the Tribunal set aside the impugned order and allowed the appeal.