By TIOL News Service

CHENNAI, NOV 27, 2013: THE Original Dispute : While the assessee claims benefits of exemption Notification No. 12/2003-ST, for excluding the cost of the goods sold or deemed to have been sold to the service recipient while providing the service of repair and maintenance; Revenue believes that the benefit of Notification No. 12/2003-ST must be confined to sale of goods, excluding "deemed sale" i.e. the value of goods incorporated into a composite transaction involving service and sale.

The issue was referred to the Larger Bench.

Earlier Larger Bench Decision : In the meantime the Larger Bench in Aggarwal Colour Advance Photo System reported in (2011-TIOL-1208-CESTAT-DEL-LB) answered the reference by holding that ;

a. for the purposes of Section 67 of the Finance Act, 1994 (the Act), the value of services in relation to photography would be the gross amount charged including the cost of goods and materials used and consumed in the course of rendering such service; the cost of unexposed film etc. would stand excluded in terms of Explanation to Section 67, if sold to the client; and

b. that the value of other goods and material, if sold separately would be excluded under exemption Notification No. 12/2003 and the term ‘sold' appearing thereunder has to be interpreted using the definition of ‘sale' in the Central Excise Act, 1944 and not as per the meaning of "deemed sale" under Article 366(29A)(b) of the Constitution.

Recent High Court Judgement - the TIOL Effect:In a recent High Court Judgement dated 13.11.2013 reported by TIOL on 19.11.2013 (G.D. Builders & Others Vs. Union of India and Others dated 13.11.2013 - (2013-TIOL-908-HC-DEL-ST)), the Delhi High Court explained the scope of Section 67 of the Act as being limited to ascertaining value of only the service component, wherever complex transactions involving service and sale elements including deemed sale are presented for valuation of a transaction as a taxable service. The case reported on 19.11.2013 was mentioned in the court on 19/20.11.2013 and relief was granted. The appellants contended that the decision of the Larger Bench in Aggarwal Colour Advance Photo System is eclipsed by binding authority, of other decisions of Supreme Court and in particular, the decision of the Delhi High Court in G.D. Builders.

The Present Larger Bench : since it is the submission of the counsel and representatives of the respective parties that the core of the dispute stands settled by higher authority of the Supreme Court and the Delhi High Court, the Larger Bench did not consider it necessary to answer the issues referred for its consideration. The grievance of the appellant is in the circumstances more appropriately decided by the regular Bench, which will now consider all relevant decisions presented for its consideration and resolution.

The Appeal remitted to the regular Division Bench.

(See 2013-TIOL-1764-CESTAT-MAD-LB)