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Issues involved: Determination of liability to pay service tax for reconditioning activities and eligibility for exemption under Notification No. 12/2003.
In the present case, the applicant was engaged in receiving old and used MS rollers, removing worn out/damaged rubber components, and re-rubberising them through vulcanisation. The original authority held that these activities amounted to reconditioning, making the appellant liable to pay service tax under the category of 'repair and maintenance service.' A demand of Rs. 17,22,364/- for the period 16-6-05 to 31-8-07 was confirmed, along with penalties under Sections 77 and 78. The Commissioner (Appeals) dismissed the appeal due to non-compliance with the stay order, which required the applicant to deposit Rs. 9 lakh towards tax and Rs. 9 lakh towards penalty. The advocate for the appellant argued that the undertaken activities should be considered as manufacturing, resulting in excisable goods. They claimed eligibility for exemption from excise duty as a small-scale unit and contended that no service tax should be levied. Alternatively, it was submitted that even if the activity is deemed liable for service tax, the appellant should be eligible for exemption under Notification No. 12/2003-S.T., dated 12-6-03, with a service tax payable of approximately Rs. Five lakh only. The SDR representing the respondent pointed out that the issue of valuation and eligibility for exemption under Notification No. 12/2003 was not raised before the original authority and therefore was not considered by him. Upon careful consideration of the submissions from both sides, the Tribunal was inclined to view the applicant's activities as reconditioning, potentially attracting service tax. It was also noted that the benefit of Notification No. 12/2003 could be applicable. Consequently, the Tribunal directed the applicant to deposit Rs. 5,00,000/- within 8 weeks. Subject to this pre-deposit, the Tribunal waived the pre-deposit of the remaining tax and penalty amounts and stayed the recovery thereof until the appeal's disposal. The appeal was scheduled for compliance reporting on 12-3-09, with the Tribunal's decision being dictated and pronounced in open court.
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