2007 (3) TMI 774 - AT - Service Tax

Summary

Issues involved:
The issue involved in this case is whether the appellant, an Engineering Company manufacturing Hydraulic Service Trolleys (HSTs) for the Indian Air Force, is liable to pay service tax for maintenance and repair services provided under a Long Term Business Agreement with HAL, or if HAL, as the main contractor, is responsible for the tax payment.

Summary of Judgment:

Issue 1: Liability for Service Tax on Maintenance and Repair Services

The appellant contested the levy of service tax on maintenance of HSTs, arguing that as a sub-contractor to HAL, the main contractor, they are not required to register for service tax. The appellant relied on Circular No. B.43/5/97-TRU and Question and Answer publication on Service Tax. The Tribunal noted that the appellant is the sole contractor to HAL for manufacturing and maintenance of HSTs, making them responsible for the services provided. The Tribunal found that the appellant is not a sub-contractor to HAL, and as the main contractor, they are liable to pay the tax for maintenance and repair services. The Tribunal rejected the appellant's claim for refund and confirmed the tax demand, but waived the penalty due to the disclosure of all relevant facts to the revenue authorities.

Key Points:
- The appellant is the sole contractor to HAL for manufacturing and maintenance of HSTs.
- The main contractor is responsible for providing taxable services, which in this case are maintenance and repair services.
- The appellant is not considered a sub-contractor to HAL.
- The tax demand on the appellant was confirmed, and the refund claim was rejected.
- Penalty was waived due to the disclosure of all relevant facts.

Case Reference:
- The Tribunal distinguished the facts of the present case from the case of BBR (India) Limited v. CCE, Bangalore -III, emphasizing the unique contractual relationship between the parties in the current dispute.

Conclusion:
The Tribunal found no merit in the appeals regarding the tax demand on the appellant and upheld the decision to confirm the tax demand and reject the refund claim. However, the penalty was set aside due to the nature of the dispute and the full disclosure of relevant facts to the revenue authorities.