2015 (2) TMI 96 - AT - Service Tax

Waiver of pre deposit - Management, Maintenance or Repair Service and Erection, Commissioning and Installation Service - Service tax on the entire contracted value inclusive of materials - Held that - they were entitled to exemption notification no. 45/210 ST dated 20.072010. The expression inclusive of taxes only means that there would be no further rise in the value of the contracts and there is nothing in the said contract that service tax have collected from the customers. In the absence of any indication of collection of service tax from customers, the demand fixed by adjudication authority cannot be appreciated. It is further seen that in any case the value of the materials, is not required to be added in the value of the services, in terms of provision of Notification No.12/2003-ST dated 1.3.2003. The contract itself shows the value of the materials separately and the value of the service separately. The appellants have also furnished copies of the VAT documents showing that VAT stands paid by them in respect of such materials. The adjudicating authority has denied the benefit of the same on the sole ground that the appellants have not claimed the Notification in the ST-3 returns filed by them. - At the time of filing the ST-3 Returns, the appellant was admittedly paying duty only on the value of the services, which fact itself is indicative that value of materials was not being taken into consideration. Otherwise also, mere non-mention of the Notification in the ST-3 Returns, does not give a reason to the adjudicating authority to deny the benefit of the same, without otherwise examining the applicability of the Notification in question. Admittedly, the Notification is applicable and as such, we are of the view that appellant has a good prima facie case so as to allow this stay application unconditionally - Stay granted.

Summary

Issues:
1. Service tax liability on the entire contracted value, inclusive of materials.
2. Applicability of Notification No.45/2010 ST dated 20.7.2010.
3. Inclusion of value of materials in service tax calculation.
4. Denial of benefit under Notification No.12/2003-ST dated 1.3.2003 due to non-mention in ST-3 returns.

Analysis:

1. The appellants, registered as service providers, were providing services to a government-owned power distribution company. Demands were raised for the period from 2007-08 to 2012-13 alleging that service tax should be paid on the entire contracted value, including materials. The appellants had been discharging service tax on the service portion and reflecting it in their returns. The adjudicating authority confirmed the demand, stating that the appellants had collected service tax from customers. However, it was found that the contract rates were inclusive of all taxes, and there was no evidence that service tax was separately charged. The Tribunal held that the absence of evidence of separate service tax collection meant the demand could not be upheld.

2. The appellants claimed exemption under Notification No.45/2010 ST until 21.6.2010 for services related to electricity distribution. The Commissioner accepted this but still confirmed the demand. The Tribunal noted that the contract values were inclusive of taxes, with no indication of separate service tax collection. The Tribunal found that the appellants had a prima facie case for the exemption and allowed the stay application unconditionally.

3. The appellants contended that the value of materials should not be added to the service value for calculating service tax, citing Notification No.12/2003-ST. They had paid VAT on materials separately and provided evidence. The adjudicating authority denied the benefit of the notification due to non-mention in ST-3 returns. The Tribunal disagreed, stating that the appellants were paying duty only on service value while filing returns, indicating materials were not considered. The non-mention of the notification in returns was not sufficient reason to deny its benefit without examining its applicability. The Tribunal found the notification applicable and allowed the stay application.

This judgment clarifies the treatment of service tax on contracted values, the applicability of specific notifications, and the importance of evidence and proper examination in tax disputes.