2014 (5) TMI 952 - AT - Service Tax

Waiver of pre-deposit - valuation - Activities of maintenance works - Revenue was of the view that service tax should have been paid on the value inclusive of value of materials consumed and therefore they issued demand of tax short paid for the period 2005-06 to 2010-11 by three different show cause notices - Held that - goods involved are in the nature of consumables and not in the nature of parts or materials which can be sold and then services provided. So the principle laid down in the case of Aggarwal Colour Advance Photo System Vs CCE Bhopal 2011 (8) TMI 291 - CESTAT, NEW DELHI (LB) is applicable to the present case. However, considering the plea regarding limitation and the financial hardship, we order the applicant to make a predeposit of Rs.10,00,000 - stay granted partly.

Summary

Issues:
1. Whether service tax should be paid on the value of materials supplied along with labor in maintenance works at thermal power plants.
2. Validity of the demand of tax short paid for the period 2005-06 to 2010-11.
3. Applicability of the principle regarding exclusion of value of materials from the value of services provided.
4. Timeliness of the show cause notice issued for the period 2005-06.
5. Financial hardship plea and predeposit requirement.

Issue 1:
The applicant, engaged in maintenance works at thermal power plants involving supply of materials and labor, paid service tax on labor but not on the value of materials supplied. The Revenue contended that service tax should be paid on the value inclusive of materials consumed. The Tribunal considered arguments on both sides, with the Revenue emphasizing that goods consumed in providing services do not warrant exclusion of material value. The Tribunal found merit in the Revenue's argument, citing a precedent case. However, considering the plea on limitation and financial hardship, the Tribunal ordered a predeposit of Rs.10,00,000 within 8 weeks and waived the predeposit of balance dues for appeal admission, with a stay on collection during appeal pendency.

Issue 2:
The Revenue issued three show cause notices for tax short paid during 2005-06 to 2010-11, resulting in a confirmed demand of Rs.42,72,295 along with interest and penalties. The applicant challenged this order before the Tribunal, arguing for exclusion of material value from service tax calculation. The Tribunal reviewed the submissions and ordered a predeposit while waiving the balance dues for appeal admission, subject to the predeposit made by the applicant.

Issue 3:
The dispute revolved around the applicability of excluding the value of materials from the services provided. The applicant contended that since materials were used in maintenance works, their value should not be included in the service tax calculation. However, the Revenue argued that most materials were consumables and not for sale, hence should be included in the service value. The Tribunal found the Revenue's argument persuasive based on the nature of the goods involved and a relevant legal precedent.

Issue 4:
A contention arose regarding the timeliness of the show cause notice issued for the period 2005-06. The applicant argued that one notice issued on 7-7-2011 was beyond the five-year period, while the Revenue asserted that it was issued on 4.4.2011. The discrepancy was noted, with the applicant pointing out the speed post receipt date as 06-07-2011. However, the Tribunal did not delve further into this discrepancy as the main focus was on the tax calculation issue.

Issue 5:
The applicant pleaded financial hardship and requested admission of the appeal without any predeposit. The Tribunal acknowledged the financial concerns but ordered a predeposit of Rs.10,00,000 within a specified timeframe. The Tribunal also granted a waiver on the balance dues for appeal admission, provided the predeposit was made as directed, with a stay on collection during the appeal process.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT CHENNAI highlights the key issues, arguments presented, and the Tribunal's decision on each aspect of the case.