2014 (7) TMI 1200 - AT - Service Tax

Waiver of pre-deposit - Demand of service tax on repair and maintenance services rendered to Military Engineering Service (MES) - Demand confirmed on services rendered to MES and cum-service tax benefit has not been extended - Held that - as has been clearly brought out by the adjudicating authority and admitted by the appellants the services rendered by them to MES are classifiable under Erection Commissioning or Installation Service and there is no requirement that these services to be taxable should be rendered to a commercial organisation. The adjudicating authority has indeed considered this point to come to a finding that the cum-tax benefit is not available to the appellants. Although in the concluding para while remanding the case for de novo adjudication CESTAT had not given specific directions to extend the said benefit it can be argued that CESTAT intended to extend such benefit. At the stage of deciding stay petition prima facie this point can be allowed to play in favour of the appellants. As regards the contention of the appellants that they had given separate values of the goods supplied and therefore the benefit of deduction of the value of the goods should have been allowed and also the work done in J&K should also have been excluded we find that the point regarding service rendered in J&K had not been taken up by the Appellants before the adjudicating authority but their contention regarding excluding the value of goods for the purpose of service tax has force as service tax cannot be charged on the sale/transfer of goods. - stay granted partly.

Summary

Issues:
1. Confirmation of demand by the adjudicating authority.
2. Extension of cum-service tax benefit.
3. Exclusion of the value of goods supplied for service tax calculation.
4. Service rendered in J&K and its exclusion from taxation.
5. Pre-deposit amount for stay application.

Confirmation of demand by the adjudicating authority:
The appellants filed a stay application along with their appeal against the Order-in-Original confirming a demand of Rs. 73,15,931 along with interest and penalties. The CESTAT had remanded the case for de novo adjudication, considering that services rendered to Military Engineering Service (MES) are not taxable under service tax. However, the adjudicating authority confirmed the demand, stating that the services provided were classifiable under Erection, Commissioning, or Installation Service, not requiring them to be rendered to a commercial organization. The CESTAT's observation regarding the cum-service tax benefit was also considered, with the adjudicating authority finding that the benefit was not available to the appellants.

Extension of cum-service tax benefit:
The CESTAT had observed that the appellants were entitled to the cum-service tax benefit, which the adjudicating authority did not consider. While the CESTAT did not give specific directions regarding this benefit, it can be argued that the benefit was intended to be extended. The point was allowed to play in favor of the appellants during the stay petition consideration. The adjudicating authority's decision on the cum-service tax benefit was scrutinized, and the appellants were granted a pre-deposit amount of Rs. 33 lakhs within six weeks to meet the requirements of the Central Excise Act, 1944, and the Finance Act, 1994.

Exclusion of the value of goods supplied for service tax calculation:
The appellants contended that the value of goods supplied should have been excluded for service tax calculation, as service tax cannot be charged on the sale or transfer of goods. The point regarding the service rendered in J&K was not raised before the adjudicating authority. However, the exclusion of the value of goods for service tax calculation was considered valid.

Service rendered in J&K and its exclusion from taxation:
The appellants argued that the work done in J&K should have been excluded from taxation, which was not addressed before the adjudicating authority. The exclusion of the work done in J&K was not specifically discussed in the judgment, but the appellants' contention regarding this exclusion was noted for further consideration during the appeal hearing.

Pre-deposit amount for stay application:
A detailed analysis of the appellants' submissions was deferred to the appeal hearing. However, a preliminary calculation showed that a pre-deposit of Rs. 33 lakhs would fulfill the statutory requirements. Therefore, the appellants were ordered to make this pre-deposit within six weeks, with the recovery of the remaining amount of service tax, interest, and penalty stayed during the appeal's pendency. Compliance was to be reported by a specified date to ensure the stay remained in effect.