2013 (10) TMI 818 - AT - Service Tax

Valuation - Maintenance and repair service - demand in respect of 70% of the total value of maintenance and repair service on which VAT has been paid - Whether deemed sale can be considered as sale or not for the purpose of levy of service tax - Held that - The decision of the commissioner to collect service tax on the value on which the assessee had already paid State Vat was contrary to the principal of fiscal federalism adopted in the constitution. Thus the demand is not sustainable - Following decision of Sobha Developers Ltd. Versus Commissioner of Central Excise and Service Tax, Bangalore 2009 (9) TMI 342 - CESTAT, BANGALORE - stay granted.

Summary

Issues: Service tax liability on maintenance and repair services for transformers; applicability of VAT payment on the value of services to determine service tax liability.

Analysis:
The judgment addresses the issue of service tax liability on maintenance and repair services for transformers provided to the appellants. The appellant argued that they have discharged VAT on 70% of the value of the services, hence they are not liable to pay service tax on that portion. The appellant relied on previous decisions to support their argument, emphasizing that the focus should be on whether VAT has been paid on the value not subject to service tax, rather than proving actual sales and materials used. The Tribunal found the appellant's argument prima facie valid based on the cited decisions. However, the respondent pointed to a decision by a Larger Bench, which the Tribunal distinguished as not directly relevant to the current case. Since there was no contradictory decision from a higher judicial forum presented, the Tribunal decided to follow the Division Bench decision, leading to a waiver of predeposit and a stay against recovery during the appeal's pendency.

In conclusion, the judgment clarifies the criteria for determining service tax liability on maintenance and repair services for transformers, emphasizing the significance of VAT payment on the value of services not subject to service tax. The Tribunal's decision to rely on the Division Bench ruling due to the absence of conflicting higher judicial decisions highlights the importance of precedent in resolving tax liability disputes.