Service Tax on Tyre Retreading – Board Clarification
In a letter to the Chairman, CBEC, the AP Tyre Retreaders Association, requested the Department not to charge Service Tax on retreading of tyres under 'Management Maintenance & Repair Service', on the ground that 'retreading of tyre' is specifically figuring in Central Excise Tariff under TI 4012 and therefore, they are excisable goods. Hence, Service Tax cannot be imposed, as Excise Duty is payable.
Board has examined the issue and observes,
"The matter has been examined. For the purpose of levy of Central Excise, Section 3 of the Central Excise Act 1994, being the charging Section provides that a duty of excise shall be levied on all Excisable Goods, which are produced or manufactured in India at the rates set forth in the first schedule of the Central Excise Tariff Act. Further, 'Excisable Goods' have been defined under Section 2(d) of the Central Excise Act (CEA) as the goods specified in the first and second schedule of the CETA as being subject to a duty of excise and include salt.
Thus, it is apparent that if any goods are barely mentioned in the Central Excise Tariff Act, then, though they would qualify as 'excisable goods', however, for the Central Excise Duty to come into operation, as per Section 3 of the CEA, the additional requirement of these goods to have been produced or manufactured in India would also have to be satisfied".
Board also referred to the Supreme Court judgement in the case of Ahmedabad Electricity Co. Ltd - 2003-TIOL-17-SC-CX, in which the Supreme Court observed,
"... Therefore, simply because goods find a mention in one of the entries of the First Schedule does not mean that they have become liable for payment of excise duty. Goods have to satisfy the test of being produced or manufactured in India. It is settled law that excise duty is a duty levied on manufacture of goods. Unless goods are manufactured in India, they cannot be subjected to payment of excise duty. There is no merit in the argument that simply because a particular item is mentioned in the First Schedule, it becomes eligible to excise duty."
So, the Board concludes and tells the Association, "retreading of tyres is covered under the ambit of the service 'Management Maintenance & Repair Service' and is liable to payment of service tax. You are accordingly requested to advise the Members of your Association to pay Service Tax"