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2014 (2) TMI 202 - AT - Service TaxWaiver of pre-deposit of service tax - Valuation - Equal amount of penalty imposed under Section 78 - Repairing and maintenance of engines of aircrafts - Whether the components, parts etc. procured by the Ministry of Defence independently and supplied to the applicants involve sale under Notification 12/2003-ST dated 20.6.03 read with the definition of sale prescribed under Rule 2 (h) of the Central Excise Act, 1944 and accordingly, be excluded from the gross taxable value of service charges - Held that - in the break-up, the details of the raw materials supplied and its value, have been mentioned. Thus, prima-facie, at this stage, it would be difficult to say that no sale of the materials was involved, hence, fall outside the scope of Notification No.12/2003-ST dated 20.6.03. In these circumstances, the applicants are able to make out a prima-facie case for total waiver of dues adjudged, accordingly, predeposits of dues adjudged in all the cases are waived and its recovery stayed during pendency of the Appeals - Stay granted.
Issues:
1. Waiver of pre-deposit of service tax and penalty under Section 78 of the Finance Act, 1994 for the applicants. 2. Inclusion of value of materials supplied by Ministry of Defence in the gross taxable value of repair and maintenance charges. 3. Determination of whether the components and parts procured by Ministry of Defence involve 'sale' under Notification 12/2003-ST dated 20.6.03. --- Issue 1: Waiver of Pre-Deposit: The applicants sought waiver of pre-deposit of service tax amounting to Rs.29.5 Crores and an equal penalty under Section 78 of the Finance Act, 1994. The applicants, being a Public Sector Undertaking, had a pending application seeking COD permission to pursue the appeal before the Tribunal. The applicants were engaged in repairing and maintaining engines of aircrafts belonging to the Ministry of Defence. The applicants contended that they had discharged service tax on the services rendered by them. The Tribunal, after considering the submissions, allowed the stay petitions and waived the pre-deposits of dues adjudged, staying the recovery during the pendency of the appeals. --- Issue 2: Inclusion of Value of Materials: The Department raised objections regarding the non-inclusion of the value of materials, i.e., parts and components of aircrafts supplied by the Ministry of Defence, in the gross taxable value of repair and maintenance charges. The applicants argued that the value of materials should be excluded from the total service charges paid by the Ministry of Defence, citing Notification 12/03-ST dated 20.6.03. They contended that as per the definition of 'sale' under the Central Excise Act, the spare parts and components were sold to them by the Ministry of Defence. The Tribunal, after examining the sample invoices provided by the applicants, found it difficult to conclude that no sale of materials was involved. Consequently, the Tribunal considered that the applicants had made out a prima facie case for the total waiver of dues adjudged, and thus, waived the pre-deposits. --- Issue 3: Determination of 'Sale' under Notification 12/2003-ST: The crux of the issue was whether the components, parts, etc., procured by the Ministry of Defence and supplied to the applicants involved a 'sale' under Notification 12/2003-ST dated 20.6.03. The Tribunal analyzed the break-up details provided in the sample invoices and found it prima facie difficult to ascertain that no sale of materials was involved. This led the Tribunal to conclude that the applicants had established a prima facie case for the total waiver of the adjudged dues. The Tribunal scheduled all the appeals for hearing, considering the substantial revenue involved and the importance of the legal question raised by the Department. --- In conclusion, the Tribunal granted the waiver of pre-deposit of service tax and penalty for the applicants, stayed the recovery during the appeal process, and fixed the appeals for hearing to delve deeper into the issue of whether the components supplied by the Ministry of Defence constituted a 'sale' under the relevant notifications and laws.
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