2018 (7) TMI 2026 - AT - Service Tax

Maintenance and Repairing Services - taxability of maintenance charge of the machine provided on hire - HELD THAT - The appellant had hired machines to the client for hire charge of ₹ 1 lakh per month. During this period, maintenance charges for said machines were stipulated @ ₹ 3.00 lakhs per month and the ownership of the machines remains with the appellant. For the period in dispute the machines were in use by the client and for such use the maintenance services were provided that this activity will be clearly fall under the definition of Maintenance and Repair Service . However, since the appellant did not collect the service tax from its customers/clients, the benefit of cum tax value in terms of Section 67(2) of the Finance Act, 1994 should be given to the appellant. Penalties - HELD THAT - There are no ingredients of suppression of facts, misstatements with an intent to evade payment of service tax - penalty set aside by invoking section 80. Appeal allowed in part.

Issues:
1. Whether maintenance charges for providing HDD Machine on hire basis are liable for service tax under 'Maintenance and Repairing Services' category.
2. Whether the appellant is liable to pay penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994.
3. Whether the appellant is entitled to the benefit of cum-tax value under Section 67(2) of the Finance Act, 1994.
4. Whether the penalties imposed on the appellant are justified.

Analysis:
1. The appellant entered into a contract to provide HDD Machine on hire basis with maintenance charges of &8377;3,00,000. The issue was whether this falls under 'Maintenance and Repairing Services' for service tax. The Tribunal found that since the maintenance services were provided during the period the machines were in use by the client, it clearly falls under the definition of 'Maintenance and Repair Service.' However, as the appellant did not collect service tax from clients, the benefit of cum-tax value under Section 67(2) of the Finance Act, 1994 was granted to the appellant.

2. The appellant argued that penalties should not be imposed as they believed service tax was not leviable on the transaction. The Tribunal noted that there was no suppression of facts or misstatements to evade payment of service tax. Therefore, invoking Section 80, the penalties imposed under various Sections of the Finance Act, 1994 were set aside.

3. The appellant contended that the service tax demanded had already been deposited by them and should be adjusted as cum-tax value. The Tribunal agreed and recalculated the demandable amount to &8377;3,33,212 based on the provisions of the Finance Act, 1994.

4. After hearing both sides and perusing the records, the Tribunal partially allowed the appeal filed by the appellant. The penalties imposed were set aside, and the appellant was granted the benefit of cum-tax value. The judgment concluded that there was no intent to evade payment of service tax, leading to the decision to set aside the penalties.

Conclusion:
The Tribunal partially allowed the appeal, ruling in favor of the appellant on the issues of service tax liability, penalties, and cum-tax value adjustment. The judgment highlighted the importance of compliance with tax regulations and the consideration of bonafide beliefs in tax matters.

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