2008 (9) TMI 245 - AT - Service Tax

Appellants were engaged in producing electrical energy under an OPERATION AND MAINTENANCE AGREEMENT - 45% of the consideration received by them was apportioned towards repairs and maintenance of the power plant and service tax paid thereon - impugned demand is on the 55% - appellant submitted that maintenance and repairs of the power plant is already covered by the service tax paid on 45% - electricity being excisable from 16-6-2005, service tax cannot be levied on production of electricity - stay granted

Summary

Issues Involved:
Interpretation of service tax liability on maintenance and repair services in relation to electrical energy production.

Analysis:
The judgment by the Appellate Tribunal CESTAT CHENNAI involved a case where the appellants were producing electrical energy for a company under an "Operation and Maintenance Agreement." The dispute arose regarding the service tax liability on the amount apportioned for repairs and maintenance of the power plant (45%) and operation of the power plant (55%). The appellants contended that the demand for service tax on the 55% portion, raised under the head "maintenance or repair services," amounted to double taxation as the maintenance and repairs of the power plant were already covered by the service tax paid on the 45% amount. They argued that since electricity production was excisable, service tax could not be levied on activities connected with its production.

Upon examining the submissions, the Tribunal noted that the demand for service tax on the 55% portion could not be sustained as it would lead to double taxation. The amended definition of "maintenance or repair services" encompassed maintenance and repairs of immovable property, which did not align with the nature of services provided by the appellants. The Tribunal referred to a previous Stay Order in a similar case where waiver and stay were granted concerning service tax related to "management or maintenance of immovable property."

The Tribunal granted waiver of predeposit and stay of recovery concerning the adjudged dues, acknowledging the merit in the appellant's argument against the service tax demand on the 55% portion. The Tribunal also scheduled the hearing of other pending appeals by the same assessee involving similar issues to be heard and disposed of together, ensuring a comprehensive resolution of all related matters.

In conclusion, the judgment clarified the service tax liability in the context of maintenance and repair services related to the production of electrical energy, emphasizing the need to avoid double taxation and ensuring a fair and consistent application of tax laws in similar cases.