2011 (5) TMI 391 - AT - Service Tax

Demand - primary object of the contract was repair and maintenance - Since the appellant did not own or possess the means for transportation, it cannot be said that the appellants were engaged in the service of transportation - There was no dispute by Revenue of the fact that part of the consideration received in respect of maintenance and repair of machinery has suffered tax - Appeal is allowed

Summary

Issues:
Interpretation of service tax liability on transportation of fly ash through pipeline.

Analysis:
The appeal revolved around the interpretation of the service tax liability concerning the transportation of fly ash through a pipeline. The appellant argued that the primary activity was the operation and maintenance of a dry fly ash handling system, not transportation through a pipeline. The appellant contended that the order levying service tax, penalty, and interest was not in accordance with the law. On the other hand, the respondent supported the appellate order, asserting that a portion of the consideration paid to the appellant was linked to the quantity of fly ash transported through the pipeline, justifying the taxation. The key point of contention was whether the service provided fell under the definition of Section 65(105)(zzz) of the Finance Act, 1994.

The judges examined the agreement in question to understand the nature of the work carried out by the appellant. They focused on the scope of work outlined in the agreement, which included routine operation, maintenance, and repair of the dry fly ash handling system. The judges noted that the primary objective of the contract was maintenance and repair, as evidenced by the manpower, tools, and consumables used for the activities. They highlighted that the contract was governed by special conditions emphasizing the operation of the fly ash handling system owned by PSEB. The judges concluded that the appellant was not engaged in the service of transporting fly ash through a pipeline but rather in the operation and maintenance of the handling system. They distinguished the case from a precedent cited by the respondent, emphasizing the unique circumstances of the present case.

In light of the analysis, the judges ruled in favor of the appellant, allowing the appeal. The judgment clarified that the appellant's activities did not constitute the service of transporting fly ash through a pipeline, as the primary focus was on the operation and maintenance of the dry fly ash handling system. The decision was based on a thorough examination of the agreement, the nature of work performed, and the specific conditions outlined in the contract.