In Brief
The Supreme Court decided whether service tax applies to the full value of tyre retreading contracts, including materials supplied by the service provider. The Court held that service tax is levied only on the service component (30%), not the entire gross amount. Section 67 of the Finance Act, 1994 and Notification No. 12/2003-ST expressly exempt the value of goods and materials sold by the service provider from service tax, provided documentary proof is maintained. The appellant was entitled to deduct material costs from the taxable value. The Court set aside the appellate tribunal's majority order and allowed the appeal, directing all amounts deposited to be returned and the bank guarantee discharged."
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