2016 (2) TMI 445 - AT - Service Tax

Taxability of repairing activity undertaken by the appellant of transformers manufactured by other manufacturers - maintenance or repair services - Held that - the requirement of statute prior to 15.06.2005 for taxability of the services rendered is very clear i.e. that the maintenance of repairs has to be provided by any person under maintenance contract or agreement. Undisputedly in the case in hand for the entire period, there was no maintenance contract entered by the appellant with the State Electricity Board for repairs of their transformers. - The tender process through which the appellant got the contract for repairing the transformers is only a work order and contract for repair and it is not a maintenance contract . - Service Tax was not leviable during the relevant period - Decided in favor of assessee.

Summary

Issues:
Taxability of maintenance or repair services undertaken by the appellant for transformers manufactured by other companies; Interpretation of the definition of maintenance or repair services pre and post 15.06.2005; Limitation period for the show-cause notice; Re-quantification of tax liability for the period post 15.06.2005.

Analysis:

Taxability of Maintenance or Repair Services:
The appellant, a transformer manufacturer, undertook repair activities for transformers not manufactured by them, leading to a dispute on service tax liability. The appellant argued that the repairs did not fall under maintenance or repair services as there was no maintenance contract with the State Electricity Boards. The Tribunal noted that pre-15.06.2005, the definition required maintenance under a contract, and as no maintenance contract existed, the tax liability was not applicable. Referring to a previous judgment, the Tribunal ruled in favor of the appellant for the period before 15.06.2005.

Interpretation of Definition Pre and Post 15.06.2005:
The definition of maintenance or repair services pre-15.06.2005 required a maintenance contract, which was absent in this case. Post-15.06.2005, the definition was broader, covering services provided under a contract or by a manufacturer. The Tribunal found the appellant liable for tax post 15.06.2005 but ordered re-quantification of the tax liability to exclude material costs, as they were charged separately.

Limitation Period for Show-Cause Notice:
The appellant claimed the demand was hit by limitation, arguing that the department was aware of their repair activities. However, the Tribunal found that the appellant had not informed the department about these activities despite specific directions to discharge the tax liability. Consequently, the limitation defense was rejected.

Re-Quantification of Tax Liability Post 15.06.2005:
The Tribunal upheld the service tax liability for maintenance or repair services post 15.06.2005 but directed re-quantification to exclude material costs. The matter was remitted back to the adjudicating authority for reconsideration of the appellant's request regarding the reduction of material costs from the taxable value.

Conclusion:
The appeal was disposed of, with the appellant being held liable for service tax on maintenance or repair services post 15.06.2005. However, no penalty was imposed due to the interpretational nature of the issue. The Tribunal's decision clarified the taxability of repair services based on the specific definitions pre and post 15.06.2005, providing guidance on the scope of service tax liability in such cases.

This detailed analysis of the judgment addresses the key issues involved, providing a comprehensive understanding of the Tribunal's decision on the taxability of maintenance or repair services undertaken by the appellant.