Mere rectification job of defects in vehicles cannot be made taxable under Technical Inspection and Certification services
Antony Garages Pvt. Ltd. (the Assessee) was engaged in manufacturing of body building of buses, trucks etc. and also undertook repair, maintenance and servicing of commercial vehicles. Tata Motors Ltd. (TML) sent vehicles, after manufacturing, to the Assessee under a works order for performing activities such as pre-delivery inspection and preventive treatment (P.T.) before exporting them (inspection activities).
The Assessee after conducting inspection and taking rectification action as recorded in the vehicle data sheets send the vehicles back to TML for export. The Revenue contended that the impugned activities are covered under ‘Technical inspection and certification service’ (“Technical inspection services”) and hence, liable to Service tax.
Further, the Assessee had given open land to enable TML to park the vehicles received from various locations for general checking and inspection for which the Assessee charged appropriate rental from TML. The Assessee further arranged for security service by security agency. Charges incurred for security and telephone expenses were reimbursed by TML to the Assessee. However, the insurance of vehicles was arranged directly by TML. The diesel filled in the vehicle tanks was also reimbursed by TML (“storage activities”). The Revenue alleged that storage activities tantamount to ‘Storage and Warehousing service’(“Warehousing services”) and hence, exigible to Service tax.
However, the Commissioner of Central Excise, Raigad dropped the demand raised in respect of storage activities holding that the Assessee had not provided any management and safe keeping for the vehicles to warrant classification under Warehousing services. But, the demand raised on inspection activities was confirmed along with interest and penalties under Technical Inspection services.
Being aggrieved with confirmation of demand under Technical Inspection services, the Assessee filed an appeal before the Hon’ble CESTAT, Mumbai whereas on the other hand, the Revenue also filed an appeal against dropping of demand under Warehousing services.
The Hon’ble CESTAT, Mumbai after observing that only standard checks of the vehicles were conducted by the Assessee which includes checking for mechanical parts, electrical parts, leakages, body fitments paints etc., and that the Assessee did not issue any certificate similar to one issued by a Certification Agency, held that the rectification job of these defects certainly seems to be activities conducted by any vehicle repair shop which by no stretch of imagination can be covered under Technical inspection services.
It was further held by the Hon’ble CESTAT, Mumbai that if the argument of the Revenue is accepted, every motor garage will become a Technical Inspection and Certification agency. This would lead to a ridiculous situation. The Revenue appears to have misread the meaning of Technical Inspection and Certification.
Further, on the issue of parking/storage of vehicles, the Hon’ble Tribunal held that the Assessee has only rented out space to TML, who has reimbursed security and telephone charges. The Assessee did not perform inventory management and insurance activity so as to get covered under Warehousing services.
Accordingly, the appeal filed by the Revenue was rejected and the appeal filed by the Assessee was allowed.