2011 (7) TMI 949 - AT - Service Tax

Waiver of pre-deposit - maintenance or repair service - Held that the department itself was of the view that the activity carried out by the assessees does not amount to providing management or repair service so as to attract service tax under this heading - Decided in favor of the assessee

Summary

Issues:
1. Whether the activity of re-rubberisation of worn-out rubberized rollers amounts to "maintenance or repair" service for the purpose of service tax liability.
2. Whether the absence of a contract or agreement between the assessee and their customers exempts them from service tax liability under the heading of "maintenance and repair service."

Issue 1 - Activity Classification for Service Tax Liability:
The judgment revolves around the classification of the activity of re-rubberisation of worn-out rubberized rollers as "maintenance or repair" service for service tax liability. The Appellate Tribunal considered arguments from both sides regarding whether re-rubberisation constitutes "repair or re-processing." The Tribunal noted the orders passed by the Commissioner (Appeals) in Kanpur and Chandigarh, which highlighted the absence of a contract or agreement between the assessee and their customers. The Commissioner (Appeals) in Chandigarh specifically stated that re-rubberisation on a job work basis does not fall under the definition of "management, maintenance, or repair service" due to the lack of a contract or agreement. Consequently, the Tribunal found a prima facie case in favor of the assessee based on these orders, indicating that the activity may not attract service tax under the "maintenance and repair service" category.

Issue 2 - Impact of Contractual Requirement on Service Tax Liability:
The absence of a contract or agreement between the assessee and their customers emerged as a crucial aspect in determining service tax liability under the heading of "maintenance and repair service." The Tribunal highlighted that the orders from the Commissioner (Appeals) in Kanpur and Chandigarh emphasized the significance of a contract or agreement for charging service tax in such cases. The Commissioner (Appeals) in Chandigarh explicitly stated that the re-rubberisation activity does not fall under the service tax purview without a contract or agreement. This led the Tribunal to conclude that the department itself acknowledged that the activity might not amount to providing management or repair service, thereby supporting the assessee's position. As a result, the Tribunal granted the prayer for waiver and stayed the recovery of the disputed amounts pending the appeal, considering the absence of a contractual arrangement as a significant factor in the service tax liability assessment.

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