2015 (2) TMI 615 - AT - Service Tax

Classification of service - providing maintenance and repairs on behalf of M/s. Modi Xerox to the customers - Assessee contends that service would fall under Business Auxiliary service - Held that - On perusal of the records it transpires that the appellant s contract with M/s. Modi Xerox is termed as a service agreement and it lays down the obligations to be provided by the appellant which includes necessary service of the products assigned by M/s. Modi Xerox. It is also on record that the appellant is billing M/s. Modi Xerox for the services rendered by him in the territory to which he has been assigned. We find that the appellant s contention that they are not covered under the repair and maintenance service is having strong force inasmuch as the certificate issued by M/s. Modi Xerox indicates that they have directly billed the customers, for the repairs and maintenance which has been attended to by the appellant herein. - From a plain reading of the definition of Business Auxiliary Service, we find that there is no clause for taxing the services or providing the services on behalf of the client. Appellant is providing services on behalf of M/s. Modi Xerox who are his client. This would indicate that the appellant is liable to service tax under business auxiliary service w.e.f. 10.09.2004 to which we were informed by the Chartered Accountant that they are doing so. - impugned order upholding the demands, interest and penalty is unsustainable and liable to be set aside - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant's services provided on behalf of M/s. Modi Xerox constitute 'repair and maintenance service' liable for taxation.
2. Whether the appellant's services fall under the category of 'Business Auxiliary Services' for service tax liability.
3. Interpretation of the definition of 'Business Auxiliary Service' pre and post Finance (no. 2) Act, 2004.

Analysis:
1. The appellant provided services for maintenance and repairs of machines for M/s. Modi Xerox. The lower authorities deemed these services as 'repair and maintenance service' subject to taxation. The appellant contested this classification, citing the service agreement with M/s. Modi Xerox, where they billed M/s. Modi Xerox for services rendered, and M/s. Modi Xerox, in turn, billed the end customers. The Tribunal noted the contractual obligations, finding that the appellant's services were not directly billed for repairs and maintenance, leading to a conclusion favoring the appellant.

2. The Revenue argued that the appellant acted as an agent or sub-contractor for M/s. Modi Xerox. However, the Tribunal observed that the service agreement between the parties outlined the appellant's obligations and billing process, indicating a service provider-client relationship rather than an agency arrangement. The Tribunal also considered the definition of 'Business Auxiliary Services' and the appellant's service tax liability under this category.

3. The Tribunal analyzed the definition of 'Business Auxiliary Service' pre and post the Finance (no. 2) Act, 2004. Prior to 10/09/2004, the definition did not explicitly include providing services on behalf of the client. However, post the mentioned Act, a clause was introduced covering "provision of service on behalf of the client." Considering this amendment and the nature of services provided by the appellant for M/s. Modi Xerox, the Tribunal concluded that the appellant's services fell under 'business auxiliary service' from 10/09/2004 onwards, aligning with the appellant's compliance with service tax liability under this category.

In light of the above analysis, the Tribunal found the impugned order unsustainable and set it aside, allowing the appeal with consequential relief.