2014 (2) TMI 1132 - AT - Service Tax

Valuation - inclusion of value of replaced parts such as HV/LT leg coils, transformer oil and other goods used in the process of repair/ maintenance of old/ damaged transformers. - Waiver of pre-deposit - Held that - The agreement between the parties catalogues a break-up of the total cost of repair and maintenance, under several heads such as labour charges and value of items to be replaced - Tribunal in the final order passed in vide the final order 2014 (2) TMI 1136 - CESTAT NEW DELHI and in the final order 2014 (2) TMI 1137 - CESTAT NEW DELHI has consistently ruled that goods which are deemed to have been sold in execution of works contracts, including in the process of rendering the taxable repair / maintenance service cannot be included within the ambit of the taxable value for the service provided. The decision of this Tribunal in Balaji Tirupati Enterprises vs. CCE, Meerut-II is confirmed by the decision of the Allahabad High Court. Revenue s appeal there against was rejected in CC&CE vs. Balaji Tirupati 2014 (1) TMI 404 - ALLAHABAD HIGH COURT . Order of Commissioner (Appeals) set aside - stay granted - Matter remanded back - Decided in favour of assessee.

Issues Involved:
1. Confirmation of service tax demand, interest, and penalties.
2. Failure to disclose the gross consideration for taxable services.
3. Waiver of pre-deposit and financial distress.
4. Jurisdiction and authority to review pre-deposit orders.
5. Maintainability of appeal against pre-deposit orders.
6. Principles governing waiver of pre-deposit.
7. Inclusion of value of replaced parts in taxable value.
8. Remand for de novo consideration.

Detailed Analysis:

1. Confirmation of Service Tax Demand, Interest, and Penalties:
The Deputy Commissioner, Central Excise, Kanpur confirmed a service tax demand of Rs. 10,24,952/-, along with interest and penalties, under Section 78 of the Finance Act, 1994. The assessee was providing maintenance and repairs of old and damaged transformers under an agreement with M/s Dakshinanchal Vidyut Vitran Nigam Limited (DVVNL). The assessee failed to disclose the gross consideration received for the taxable management, maintenance, or repair (MMR) service, disclosing only the labor charges received.

2. Failure to Disclose Gross Consideration:
The proceedings initiated by a show cause notice dated 07.10.2011 culminated in the adjudication order dated 28.03.2012. The assessee disclosed only the labor charges but not the gross value received for the services provided.

3. Waiver of Pre-Deposit and Financial Distress:
The appellant sought a waiver of pre-deposit due to severe financial distress. The Commissioner (Appeals) granted a conditional waiver of pre-deposit of 25% of the duty and penalty confirmed by the adjudicating authority. The appellant's request for reconsideration of the pre-deposit order was rejected, leading to the dismissal of the appeal for failure to pre-deposit.

4. Jurisdiction and Authority to Review Pre-Deposit Orders:
The Commissioner (Appeals) held that they had no authority to review the pre-deposit order once passed and that the appellant should have approached the Tribunal if aggrieved by the pre-deposit order. The Tribunal entertained doubts about the maintainability of an appeal against such an order and whether the correctness of the pre-deposit order could be reconsidered.

5. Maintainability of Appeal Against Pre-Deposit Orders:
The Tribunal considered several precedents and concluded that an appeal to the Tribunal lies against a final order passed by the Commissioner (Appeals) and not against an interlocutory order of pre-deposit. However, the Tribunal is authorized to consider the correctness of an earlier pre-deposit order when an appeal is preferred against a final order dismissing an appeal for failure of pre-deposit.

6. Principles Governing Waiver of Pre-Deposit:
The appellate Commissioner must avoid a mechanical approach and apply principles set out in judicial precedents while disposing of waiver of pre-deposit applications. The Commissioner (Appeals) has the jurisdiction to entertain applications for rectification or modification of pre-deposit orders for errors apparent on the face of the record.

7. Inclusion of Value of Replaced Parts in Taxable Value:
The primary authority concluded that the gross consideration received, including the value of replaced parts such as HV/LT leg coils, transformer oil, and other goods used in the repair/maintenance process, is the taxable value. However, the Tribunal consistently ruled that goods deemed to have been sold in execution of works contracts cannot be included within the taxable value for the service provided.

8. Remand for De Novo Consideration:
The Tribunal set aside the orders of the Commissioner (Appeals) directing pre-deposit and rejecting the appeal for failure of pre-deposit. The matter was remitted to the Commissioner (Appeals) for de novo consideration on merits, without expressing any opinion on the substantive merits of the case.

Conclusion:
The Tribunal granted waiver of pre-deposit, set aside the impugned orders, and remitted the matter for fresh consideration by the Commissioner (Appeals) on merits. The Commissioner (Appeals) is directed to dispose of the appeal by due consideration of the material on record and applicable principles of law, without any costs.

← Previous Next →