2015 (6) TMI 1032 - AT - Service Tax

Valuation - Includability - Total cost of services - Services of Air-conditioning and Electricity - Appellant contended that while supplying the said services he uses diluted water as also diesel the cost of which should be excluded from the service inasmuch as the same would amount to sale of goods but as per Department diesel and diluted water is not being supplied by the appellant directly to the customers and as such it is not a case of sale of goods. Held that - the diluted water and diesel are not the goods being supplied by the appellant to their customers so as to exclude the cost of the same but are the raw materials being used by them for providing the final services. As such taking into account the overall facts and circumstances we are of the view that the appellant should be put to some terms of deposit as a condition of hearing of their appeal and direct them to deposit an amount of 5, 00, 000, 00/- (Rupees Five Crores only) within a period of 12 weeks from today.

Summary

Issues:
Confirmation of service tax under 'Maintenance Service' category, exclusion of cost of diesel and diluted water from services provided, financial difficulty plea, requirement of deposit for appeal hearing.

Confirmation of service tax under 'Maintenance Service' category:
The Appellate Tribunal noted that the appellant is a registered Service Tax provider under the category of facility management services, providing Air-conditioning Services, Generation of Electricity Services, and other related services. The major part of the demand pertained to Air-conditioning and Electricity services supplied by the appellant. The advocate argued that the cost of diesel and diluted water used in providing these services should be excluded as they amount to the sale of goods. However, the Departmental Representative contended that these items are raw materials used by the appellant in providing services and should be considered in the total cost for service tax purposes.

Financial difficulty plea:
The advocate representing the appellant did not plead any financial difficulty and even admitted that the appellant is a profit-making concern. This admission indicated that the appellant was not facing financial constraints, which could have been a factor in determining the need for a deposit for the appeal hearing.

Requirement of deposit for appeal hearing:
Considering the contentious nature of the issue regarding the inclusion of the cost of diesel and diluted water in the services provided, the Tribunal decided that the appellant should make a deposit of Rupees Five Crores within 12 weeks for the appeal hearing to proceed. This deposit was imposed as a condition for hearing the appeal, taking into account the overall facts and circumstances of the case. The Tribunal also clarified that the deposit amount was determined based on various factors, including the actual demand on electricity charges collected by the appellant and paid to the concerned department. The Tribunal further mentioned that subject to the deposit, the pre-deposit amount would be dispensed with, and recovery stayed during the pendency of the appeal. Compliance was scheduled to be ascertained on a specified date.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT BANGALORE highlighted the key issues involved, the arguments presented by both parties, and the Tribunal's decision regarding the confirmation of service tax, exclusion of certain costs, financial position of the appellant, and the requirement of a deposit for the appeal hearing.