2014 (5) TMI 1020 - AT - Service Tax

Demand of service tax - Management/maintenance/repair service - maintenance contract with supply of goods - assessee contended that entire amount relates to supply of goods - Re quantification of demand - Exclusion of value of goods - Held that - both Revenue as well as the appellants have not segregated the amounts received towards service and supply of goods and quantified the demand correctly. That being the position, the matter in any case has to be remanded. At the same time, it would be unfair to the Revenue if the remand order is passed without requiring appellants to make any pre-deposit especially in view of the fact that they have made a claim that entire amount relates to supply of goods which does not seem to be based on facts. In view of the above, while we consider it appropriate and in the interest of both the sides that the matter should be remanded at this stage itself rather than granting a stay subject to pre-deposit and passing a final order thereafter, yet we consider that appellant should be put to terms. Accordingly, the appellant is required to deposit an amount of Rs.50,00,000 within eight weeks and report compliance to the Commissioner (original adjudicating authority) who after noting compliance shall proceed to adjudicate the matter afresh after giving reasonable opportunity to the appellants to present their case - Decided partly in favour of assessee.

Summary

Issues:
1. Taxability of telecommunication services obtained from abroad.
2. Tax liability on maintenance/management/repair services.
3. Correct quantification of service tax liability.
4. Requirement of pre-deposit for remand order.

Analysis:
1. The appellant, a 100% EOU providing services to Bank of America entities in the USA, challenged the demand of service tax on telecommunication services obtained from abroad. The appellant argued that since the foreign service providers are not 'Telegraph Authorities' as required by law, the demand for telecommunication services should not stand. The Tribunal noted the historical perspective pre-1.6.2007 and the current legal provisions. The Tribunal found the demand of Rs. 1,13,05,439 on telecommunication services unsustainable and set it aside.

2. Regarding the tax liability on maintenance/management/repair services, the appellant contended that the contract with Dimension Data Network Service (DDNS) primarily involved goods supply with a minor service element. The appellant disputed the tax demand on the entire sum without excluding the value of goods. The Tribunal examined the agreement between Bank of America and DDNS, invoices, and submissions. It found discrepancies in both parties' claims and the difficulty in quantifying the amounts correctly. The Tribunal ordered the appellant to deposit Rs.50 lakhs pending further adjudication.

3. The appellant also raised concerns about the correct quantification of service tax liability, stating that they had discharged liabilities for most services. The Tribunal acknowledged errors in including non-taxable services and purchase transactions in the demand. It directed a re-quantification of the tax liability after excluding the value of goods and set aside the rest of the demand already paid by the appellant.

4. In the context of remanding the matter, the Tribunal required the appellant to make a pre-deposit of Rs.50,00,000 within eight weeks for the case related to maintenance/management/repair services. The Tribunal emphasized the need for a fair approach to both parties and ordered a remand for further adjudication by the original authority. The Tribunal clarified that the pre-deposit requirement was specific to the appellant's case and exempted other matters from such a condition.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT Bangalore highlights the key issues addressed, the arguments presented by the appellant and the respondent, and the Tribunal's findings and directives on each issue involved in the case.