2014 (6) TMI 460 - AT - Service Tax

Demand of service tax - Management, Maintenance and Repair Service - Held that - The appellant s were providing the service of retreading of tyres, which is a taxable service. The main contention of the appellant is that they paid service tax on labour portion. They are contesting demand on the material portion - in the case of maintenance and repair of transformers entered into agreement with clients in two separate parts, namely, scope of repair work and supply of parts, the value of the goods used in carrying out repair activities is not includible in the taxable value. Service tax can be levied on the service component of any contract involving service with sale of goods etc. Computation of service component is a matter of detail and not a matter relating to validity of imposition of service tax. It is procedural and a matter of calculation. Merely because no rules are framed for computation, it does not follow that no tax is leviable - tax is not leviable on material portion of the contract. But, it is required to examine the record - Matter remanded back - Decided in favour of assessee

Summary

Issues:
1. Maintainability of the appeal dismissed for non-compliance of stay order.
2. Taxability of service under 'Management, Maintenance, and Repair Service' for retreading of tires.

Issue 1: Maintainability of the appeal dismissed for non-compliance of stay order

The Appellate Tribunal, after hearing the stay application, decided to proceed with the appeal. The Revenue raised a preliminary objection on the appeal's maintainability, arguing that the appeal before the Commissioner (Appeals) was dismissed due to non-compliance with the stay order, making it not appealable before the Tribunal. The Tribunal referred to previous cases, including Venus Rubber, where the appeal was rejected for failure of pre-deposit. However, the appellant cited the case of M/s. Girnar Transformers Pvt. Ltd., highlighting discrepancies in the consideration of previous decisions. The Tribunal, after analyzing various decisions, set aside the order directing pre-deposit, granting waiver, and remitting the matter to the Commissioner (Appeals) for a decision on merits and in accordance with the law. The Tribunal overruled the preliminary objection based on the decision in the case of M/s. Girnar Transformers Pvt. Ltd.

Issue 2: Taxability of service under 'Management, Maintenance, and Repair Service' for retreading of tires

The dispute involved service tax demanded for 'Management, Maintenance, and Repair Service' related to retreading of tires. The appellant contended that they paid tax on the labor portion but contested the demand on the material portion. The appellant referred to the case of M/s. Electromec Engineering Enterprises, where it was held that the value of goods used in repair activities is not includible in the taxable value. However, the Revenue cited the case of Safety Retreating Corpn. Pvt. Ltd., where the appeal on the same issue was rejected. After considering submissions and case laws, the Tribunal held that tax is not leviable on the material portion of the contract. The Tribunal directed the Commissioner (Appeals) to decide the matter on merit without insisting on any pre-deposit, emphasizing the need for a detailed examination of the record in light of relevant case laws. The impugned order was set aside, and the matter was remanded to the Commissioner (Appeals) for a decision after proper opportunity of hearing to the appellant.

In conclusion, the judgment addressed the issues of appeal maintainability and taxability of services in a detailed manner, considering relevant case laws and precedents to arrive at a just decision. The Tribunal emphasized the importance of due process and proper consideration of legal principles in resolving the disputes presented before it.