In Brief
The Supreme Court considered whether service tax on tyre retreading services applies to the entire amount charged or only the service component. The Court held that service tax applies only to the service component (30% in this case), not to the value of materials and parts used and transferred to the customer (70%). Section 67 of the Finance Act, 1994, expressly excludes material costs from service tax valuation. The Court set aside the tribunal's majority order and upheld the Vice President's view, finding that materials transferred constitute a deemed sale outside the tax base, provided adequate documentary proof is maintained.
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