2016 (12) TMI 795 - AT - Service Tax

Repair and Maintenance service - nature of contract - Works Contract introduced with effect from 01.06.2007 - Valuation - Held that - the said legal issue was not placed before the Commissioner and as such his opinion is not available. For the said purpose, he has already moved a Miscellaneous Application for raising the said legal ground - As the additional ground raised by the appellant is a legal ground and not relatable to any verifiable facts, we allow the same to be taken up for consideration. Further in-as-much-as the said ground was not raised before the adjudicating authority, we deem it fit to remand the matter for examining the said issue. - appeal allowed by way of remand.

Summary

Issues:
1. Taxability of spare parts used in service contracts.
2. Interpretation of Works Contract for repair and maintenance services.
3. Exclusion of motor vehicles from Management, Maintenance, and Repair services.

Analysis:

Issue 1: Taxability of spare parts used in service contracts
The appellant entered into agreements with a company for repair and maintenance services, including the use of spare parts billed separately. Discrepancies arose when the actual cost of spare parts used differed from the agreed price. The revenue viewed this difference as part of the service value subject to taxation. The appellant argued that the spare parts were subject to sales tax, and any profit or loss incurred did not alter the service value. They cited a Supreme Court decision emphasizing the separation of activities and profits in such cases.

Issue 2: Interpretation of Works Contract for repair and maintenance services
The appellant contended that the contracts in question fell under Works Contract for repair and maintenance, introduced in the statute later. Referring to a Supreme Court decision, they argued that such services were not taxable before a specific date, thus challenging the tax liability during the relevant period.

Issue 3: Exclusion of motor vehicles from Management, Maintenance, and Repair services
The appellant highlighted the exclusion of motor vehicles from the definition of Management, Maintenance, and Repair services under the Finance Act. They cited legal precedents where dumpers were considered motor vehicles, emphasizing the need for a legal opinion on this matter not presented before the Commissioner.

The Tribunal allowed the appellant to raise the legal issue regarding the classification of dumpers as motor vehicles for further consideration, remanding the case for examination. Other arguments raised, such as the plea of limitation, were left open for the adjudicating authority to decide in subsequent proceedings.