Service Tax on Retreading old tyres

CBEC in the month of Feburary,2012, in their circular CBEC F.No.137/125/2011-ST. have addressed the issue and relied on the judgment of Hon’ble Supreme Court in the case of M/s P.C. Cheriyan v. Mst. Barfi Devi. The context is as below:

“ In the said judgment, Hon’ble Supreme Court has observed that-

“The retreading of old tyres does not bring into being a commercially distinct or different entity. The old tyre retains its original character, or identity as a tyre. Retreading does not completely transform it into another commercial article, although it improves its performance and serviceability as a tyre. Retreading of old tyres is just like resoling of old shoes.”

Though this judgment is given in the context of Transfer of Property Act, however, the basic principle behind “manufacture” of coming into existence of a commercially different and distinct entity is equally applicable to Central Excise Act and has been relied upon by the Tribunal in certain cases while interpreting ‘manufacture’ under section 2(F) of the Central Excise Act. “

 This is a works contract and service tax shall be charged @ 70% of amount charged w.e.f. 1-7-2012