2008 (2) TMI 173 - AT - Service Tax

Annual Maintenance Contracts (AMC) - In terms of the Notification 12/2003-Service Tax, the spares and parts are not required to be taken into consideration while arriving at the service tax liability. The appellants have paid service tax on the commission received by them in terms of AMC contracts - Prima facie, the impugned order confirming demand is not sustainable - stay application is allowed by granting waiver of pre-deposit

Summary

Issues:
Violation of remand directions regarding deduction of spares and parts in service tax liability under Section 67 of the Finance Act.

Analysis:
1. The appellants were required to pre-deposit a substantial service tax amount and penalty under various sections of the Finance Act. The dispute arose from the appellants claiming a 70% deduction for spares and parts under Annual Maintenance Contracts (AMC). The Commissioner found this deduction arbitrary and legally unsustainable, rejecting the certificate provided by a Chartered Accountant regarding the value of the parts and spares. The Commissioner concluded that the claim could not be considered without proper verification and rejected the pleas, confirming the demands.

2. The appellant's counsel argued that there was a clear violation of remand directions, as they had presented evidence to the Commissioner, who failed to quantify or verify the invoices related to the sales price. The counsel contended that the deduction was permissible under Notification No. 12/2003-Service Tax and cited relevant judgments supporting their position. They emphasized that the service tax on parts and spares should be deductible from the service contract, as they had paid the tax on the commission received for AMC contracts.

3. The learned SDR opposed the appellant's arguments, stating that the burden to prove the deduction lies with the assessee, and mere production of invoices is insufficient. She argued that the Commissioner's findings were justified, as the appellants had not provided the actual cost of the materials, relying only on an approximate estimate of 70% without proper substantiation. She highlighted the need for the appellants to pre-deposit the entire amounts due and differentiated the cited judgments from the present case.

4. In response, the appellant's counsel reiterated that all necessary details had been submitted to the Commissioner, who failed to examine the evidence on record thoroughly.

5. The Tribunal, in its analysis, noted that the Commissioner had not adequately examined the invoices and records as directed. Considering the Notification and relevant case law, the Tribunal found that the spares and parts should not impact the service tax liability. Given the high revenue involved and the appellants' payment of service tax on received commissions, the Tribunal deemed the impugned order unsustainable. Consequently, the appellants were granted a waiver of pre-deposit for the disputed amount, with recovery stayed pending appeal. The matter was scheduled for final hearing on a specified date.