2011 (5) TMI 616 - AT - Service Tax

De-shelling and re-shelling taxed under the head Maintenance or Repair - period July 03 to Nov 05 - Suppression of facts - The clarification dt. 27-07-2005 from CBEC does not talk about services provided by manufacturers - Held that - Prima facie the service provided by the Appellant during the period under dispute was covered by the definition of taxable entry in force at that time. This clarification which came in July 2005 cannot be reason not to declare the value of taxable services from July 2003. Appellant may make a deposit of Rs.3,00,000/- in addition to the amount of Rs.8,00,000/- already deposited by him within eight weeks from the order and report compliance on 13/05/2011

Summary

Issues:
Whether de-shelling and re-shelling of old sugar mill rollers constitute maintenance or repair liable to service tax under the relevant period.

Analysis:
The Appellants engaged in de-shelling and re-shelling of old sugar mill rollers contested the imposition of service tax under "Maintenance or Repair" from July 2003 to November 2005. The activity involved re-casting the shell by melting and adding material, which was argued not to be repair in the true sense. The department initially considered it as manufacturing, indicating it was a reconditioning activity, not amounting to manufacture under the Central Excise Act.

The definition of "maintenance or repair" under section 65(64) of the Finance Act 1994 during the relevant period was scrutinized. It encompassed services provided under a maintenance contract or by a manufacturer relating to maintenance, repair, or servicing of goods or equipment. The subsequent amendment in 2005 explicitly included re-conditioning, leading the Appellants to argue that their activity should not be taxed for the previous period.

The Appellants relied on a clarification issued by the Ministry, emphasizing that repair or servicing undertaken as part of any contract or agreement, not necessarily a maintenance contract, was taxable. They cited various case laws to challenge the lower authority's interpretation regarding the necessity of a maintenance contract when a manufacturer performs repair.

Regarding the time-barring of the demand, the Appellants contended that the notice issued under the extended period was disputable due to the legal interpretation of the entry scope. They highlighted the delay in issuing the notice after the audit party's discovery, indicating the department's uncertainty about the entry's scope, thus refuting the allegation of suppression to evade duty.

The argument presented by the Ld DR emphasized the distinction in the taxable entry's two parts, one requiring a contract or agreement and the other not. The clarification from CBEC was deemed applicable to the former part, not for repair done by a manufacturer. The Tribunal found the service provided by the Appellants fell within the taxable entry definition during the disputed period, dismissing the limitation argument and ordering a deposit while waiving the balance amounts due under the impugned order.