The Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that service tax is not demandable on logistics charges recovered from buyers when Value Added Tax ( VAT ) is paid on same. The Appellants M/s Premier Car Sales Ltd are engaged in trading of Motor Vehicles of Hyundai, and Honda two-wheelers and Piaggio three-wheelers. They have been registered under Service Tax for providing services of Servicing of Motor Vehicle’, `Business Auxiliary Services’ and `Renting of Immovable Property Services’. During scrutiny of records of the Appellants, it was observed that they had availed Cenvat credit in respect of service tax paid on various input services like telephone service, courier service, business promotion, cleaning and housekeeping, insurance, maintenance or repairs, advertisement etc. The Appellants had been recovering logistic charges from the buyers of the car. The Department alleged that the Appellants had not deposited service tax on such logistic charges. The Commissioner has held that the Appellants have charged the logistics charges over and above the ex-showroom price of the car.

If logistic charges were part of the transaction value, then they could have been included in the sale value and mentioned in the sale invoice but the Appellants had separately charged logistic charges and issued separate invoices in this regard. It has therefore been held that it is a pure service taxable under the provisions of the Finance Act, 1994 and these logistics charges are not part of transaction/sale value, rather logistics charges are the amount charged from the customers in view of services related to logistics charges. It was submitted by appellants that they have collected logistics charges as part of transaction value at the time of sale of the vehicle. These charges are part of the sale invoice and VAT is collected on the same. They also submitted that there can be no service till the goods are sold to another person.

The Tribunal noted that the VAT Tribunal in their case had held that the logistic charges recovered at the time of sale of the car are liable to be included in the sale price of the vehicle. It was held that VAT was payable on logistic charges. It is the settled principle of law that service tax and VAT are mutually exclusive and a transaction can either be taxed under service tax or VAT. The CESTAT observed that once VAT has been paid, service tax cannot be demanded. A two-member bench of Mr P K Choudhary, Member (Judicial) and Mr Sanjiv Srivastava, Member (Technical) while allowing the appeal held that “service tax could not have been demanded on logistic charges; particularly when Appellants have paid VAT on the same, Department has not been able to specify the nature of service provided and the order of Commissioner (Appeals) in another case has been accepted by the Department.”  Shri Kapil Vaish, Chartered Accountant appeared for the Appellant and Shri Sandeep Pandey, Authorized Representative appeared for the Respondent.