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2023 (6) TMI 1308 - AT - Service TaxLiability of Service Tax - differential amount of consideration and actual value of spare parts for the period prior to 01.07.2012 or not - value as per Rule 2A(i) (c) of the Service Tax Valuation Rules 2006 or Rule 2A(ii) of the Rules? - extended period of limitation - penalty. Whether the appellant is liable to pay Service Tax on the differential amount of consideration and actual value of spare parts for the period prior to 01.07.2012 or not? - HELD THAT - It is a fact on record that maintenance and repair contracts were entered between appellant and TISCO is the composite contracts involving supply of goods as well as providing the service. In that circumstances when there is a contract of supply of goods as well as services the same was termed as works contract and the same was taxable w.e.f. 01.06.2007 under the category of works contract services as held by the Hon ble Apex Court in the case of COMMISSIONER CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT . Therefore prior to 01.06.2007 the nature of activity undertaken by the appellant is correctly classifiable under works contract services and for the period prior to 01.06.2007 covered by the decision of Larsen Toubro Ltd. (supra) and not liable to pay Service Tax at all. W.e.f. 01.06.2007 similar issue has come up before this Tribunal in the case of Xerox India Ltd. 2018 (3) TMI 1006 - CESTAT CHANDIGARH wherein this Tribunal has held that if service has been provided along with material and the value of material supplied cannot be vivisected in that circumstances appropriate classification of the service shall be works contract service and same is not taxable prior to 01.06.2007. Further it was held by this Tribunal that for the period post 01.06.2007 the maintenance and repairs and XGS services are classifiable under works contract service. As it has been held that post 01.06.2006 also the activity of maintenance and repairs if provided along with material in that circumstances the appropriate classification is under works contract service and demand under the category of maintenance and repair service is not sustainable. Therefore prior to 01.07.2012 the appellant is not liable to pay Service Tax in question. Accordingly the demand for the period prior to 01.07.2012 confirmed by the impugned orders are set aside. Accordingly this issue is answered in favour of the Appellant. Whether the appellant is liable to pay Service Tax on the value as per Rule 2A(i) (c) of the Service Tax Valuation Rules 2006 or Rule 2A(ii) of the Rules? - HELD THAT - Rule 2(1)(c) prescribed that where VAT/Sales Tax has been paid or payable on actual value of the property goods transferred in execution of works contract then the such value adopted for the purpose of payment of Value Added Tax or Sales Tax shall be taken as the value of property goods transferred in execution of the said works contract for determination of the value of the service portion in execution of the contract under the clause which means if the actual value of goods transferred is available on which VAT has been paid the same shall be excluded from the total value of works contract service and on remaining part of the value the Service Tax is payable. Admittedly in the case in hand the service has been classified under works contract service and the value of goods supplied is ascertainable on which they have paid VAT therefore the same has to be excluded from the value of works contract to ascertain the value of taxable service provided by the appellant. Rule 2A(c) of the Valuation Rules only applies in case the value of goods supplied was not determined under the Rule 2A of the Rules. But in the case in hand value of material supplied has already been ascertained and VAT has been paid thereon in that circumstances for the period post 01.07.2002 the taxable value is to be determined in terms of Rule 2A(i)(c) of the Valuation Rules 2006 therefore this issue is also answered in favour of the Appellant. Whether in the facts and circumstances of the case extended period of limitation is invocable or not? - HELD THAT - As whole case is interpretation of the provisions of Service Tax (Determination of Value) Rules 2006 and classification of the services therefore the extended period of limitation is not invocable in the facts of the present case. Accordingly the said issue is also answered in favour of the appellant. Whether penalty can be imposed on the appellant or not? - HELD THAT - In the facts and circumstances of the present case no penalty is imposable on the appellant. Accordingly same is answered in favour of the appellant. All the issues have been answered in favour of the appellant - Appeal allowed.
Issues Involved:
1. Liability to pay Service Tax on the differential amount of consideration and actual value of spare parts for the period prior to 01.07.2012. 2. Applicability of Rule 2A(i)(c) or Rule 2A(ii) of the Service Tax Valuation Rules, 2006. 3. Invocability of the extended period of limitation. 4. Imposition of penalty on the appellant. Summary: (a) Liability to pay Service Tax on the differential amount of consideration and actual value of spare parts for the period prior to 01.07.2012: The Tribunal found that the maintenance and repair contracts between the appellant and TISCO were composite contracts involving supply of goods and services. Such contracts were classified as 'works contract' and were taxable from 01.06.2007 under works contract services as held by the Hon'ble Apex Court in Commissioner v. Larsen & Toubro Ltd. Consequently, for the period prior to 01.06.2007, the appellant's activities were not liable to Service Tax. Post 01.06.2007, similar issues were addressed in Xerox India Ltd. and SEW Infrastructure Ltd., where it was held that maintenance and repair services provided along with material should be classified under works contract services and are not taxable under maintenance and repair service. Therefore, the appellant is not liable to pay Service Tax for the period prior to 01.07.2012, and the demand for this period is set aside. (b) Applicability of Rule 2A(i)(c) or Rule 2A(ii) of the Service Tax Valuation Rules, 2006: The Tribunal referred to Rule 2A of the Service Tax (Determination of Value) Rules, 2006, which states that the value of service portion in the execution of a works contract shall be equivalent to the gross amount charged for the works contract less the value of property in goods transferred. Since the value of goods supplied was ascertainable and VAT was paid thereon, the Tribunal held that Rule 2A(i)(c) is applicable. Therefore, the taxable value should be determined by excluding the value of goods on which VAT was paid, and the appellant is not liable to pay Service Tax on the entire consideration amount. (c) Invocability of the extended period of limitation: The Tribunal held that the entire case involved interpretation of the provisions of the Service Tax (Determination of Value) Rules, 2006, and classification of services. Hence, the extended period of limitation is not invocable in this case. (d) Imposition of penalty on the appellant: Considering the facts and circumstances of the case, the Tribunal concluded that no penalty is imposable on the appellant. Conclusion: The Tribunal set aside the impugned orders, answering all the issues in favor of the appellant and allowed the appeals.
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