2007 (6) TMI 68 - AT - Service Tax

Demand(Service tax) - Revenue contended that appellant activity was covered under the category of Testing and certification charges and liable to pay service tax - Held that revenue contention was not justified and set aside

Summary

Issues:
1. Whether the activity of testing and certification of energy meters by the appellants constitutes a taxable service liable for service tax.
2. Interpretation of Circular No. 89/7/2006/S.T. by the Board regarding the statutory testing of energy meters.
3. The applicability of penalty in the case.

Analysis:
1. The issue in this case revolves around determining whether the testing and certification of energy meters by the appellants should be considered a taxable service subject to service tax. The Revenue argued that this activity falls under the category of "Testing and Certification charge," making it liable for service tax. However, the appellants contended that this activity is a statutory requirement necessary for safe energy supply and should not be considered a service for service tax purposes. Both authorities initially rejected the appellant's argument, but the Tribunal noted that the Board clarified that testing activities carried out as a statutory requirement are not taxable services. The appellants did not receive separate consideration for this testing and certification activity, which was done for the safe supply of energy. Therefore, based on the Board's Circular and the nature of the activity, the Tribunal allowed the appeal, stating that the demand for service tax was not justified.

2. The second issue involves the interpretation of Circular No. 89/7/2006/S.T. issued by the Board regarding the statutory testing of energy meters. The appellants' counsel referred to this circular, emphasizing that statutory testing of energy meters should not be categorized as a taxable service. The Tribunal considered this circular and observed that the Board itself clarified that testing activities conducted as part of a statutory requirement should not be considered taxable services. This interpretation played a crucial role in the Tribunal's decision to allow the appeal and reject the service tax demand.

3. Lastly, the question of penalty imposition was also addressed in this case. The learned DR defended the impugned order, arguing that the testing of meters should be considered a taxable service. However, given the Tribunal's decision that the activity did not constitute a taxable service based on the Board's Circular, the confirmation of the demand for service tax was deemed unjustified. Consequently, the appeal was allowed, and any consequential relief was granted to the appellants. The Tribunal's decision highlights the importance of considering statutory requirements and relevant circulars in determining the taxability of specific activities under the service tax regime.