2017 (1) TMI 1552 - AT - Service Tax

Maintenance Contract - levy of service tax - Held that - Considering the substance of the contract, learned adjudicating authority is directed to eliminate the value of the goods from the entire contract and levy Service Tax on the service component only. Appellant is entitled to fair opportunity of hearing in the course of readjudication and make defence plea as well as lead evidence - Ld. authority shall pass a reasoned and speaking order recording such plea and evidence. In view of the difficulties in interpretation of law involved at the infancy stage of introduction of law and also there was confusion as to the invoking of the taxing entry there shall not be any penalty - matter is remanded for readjudication to the learned adjudicating authority.

Summary

Issues:
1. Whether the maintenance contract carried out by the respondent was liable to Service Tax at the relevant point of time.
2. Whether there was a deficiency in understanding of facts and law by the authorities below.
3. How to calculate the Service Tax on the service component only.
4. Whether penalty should be imposed due to difficulties in interpretation of law at the infancy stage.

Analysis:

1. The appeal was filed by the Revenue challenging the decision of the appellate authority that the maintenance contract carried out by the respondent was not liable to Service Tax at the relevant time. The respondent clarified that the period in question was from 1-7-2003 to 31-3-2004, during which they performed activities like conversion of light fittings, repairing street lights, etc. The Commissioner (Appeals) correctly held that the appellant was not liable to Service Tax for this maintenance contract.

2. It was observed that there was a significant deficiency in understanding of the facts and law by the authorities below, as evidenced by the Show Cause Notice (SCN) and the orders. The adjudicating authority incorrectly categorized the maintenance and repair work under the taxing entry of maintenance and repair of goods or equipment, which was not applicable in this case.

3. The Tribunal directed the adjudicating authority to calculate the Service Tax on the service component only, excluding the value of the goods involved in the maintenance contract. The appellant was granted the right to a fair opportunity of hearing during the readjudication process, allowing them to present a defense plea and lead evidence. The authority was instructed to issue a reasoned order documenting the plea and evidence presented.

4. Due to the complexities in interpreting the law at the initial stages of its introduction and the confusion surrounding the application of the taxing entry, the Tribunal decided not to impose any penalty. The matter was remanded back to the adjudicating authority for a fresh decision considering the directions provided by the Tribunal.

This comprehensive analysis of the judgment highlights the key issues addressed by the Appellate Tribunal CESTAT CHENNAI and the detailed reasoning behind each decision made in the case.