2017 (1) TMI 163 - AT - Service Tax

Valuation - works contract - payment of service tax on 20% of the value - Electrical wiring, fittings and related services - demand - on 80% of the consideration received the appellant failed to discharge service tax under the category of management, maintenance and repair services. It was held that the appellants artificially spilt-up the consideration received in two components - 80% towards supply of materials and 20% towards rendering of services. Held that - revenue is not correct to say that the whole work order has been considered as service contract only and subjected to levy to the full. We find such assertion is factually untenable. No examination of quantum of materials supplied has been made. The appellant s claim based on the written contract, as agreed upon by the recipient of services, has been rejected without valid grounds. We further find that the appellants submitted that the supply of materials in terms of the work order always exceeds 80% to the total value. It was further asserted that this can be established from their accounts and the bills raised to the recipient of service. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Service tax liability on the appellant for electrical wiring and related services.
2. Dispute over the bifurcation of consideration received for supply of materials and rendering of services.
3. Validity of confirming service tax on the full consideration value received.
4. Applicability of retrospective amendment under Finance Act, 2012 for exclusion of non-commercial government buildings from tax liability.
5. Comparison with similar cases where demand proceedings were dropped.

Analysis:
1. The appeal challenged an order confirming service tax liability on the appellant for providing electrical wiring and related services to various organizations. The lower authority found that the appellant failed to discharge service tax on 80% of the consideration received, categorizing it under management, maintenance, and repair services.

2. The appellant argued that the bifurcation of consideration into 80% for supply of materials and 20% for services was not artificial but based on actual supply agreements with organizations like CPWD, NDMC, and DJB. They contended that the value of materials supplied exceeded 80%, as evidenced by documents, and disputed the legality of the service tax liability under the mentioned category.

3. The dispute centered on the validity of confirming service tax on the full consideration value received by the appellant. The Tribunal noted that without examining the actual quantity of materials supplied, it was incorrect for the Original Authority to levy tax on the entire consideration, ignoring the terms of the work order. The Tribunal found the assertion factually untenable and emphasized the need for valid grounds to reject the appellant's claim based on written contracts.

4. The judgment also considered the applicability of a retrospective amendment under the Finance Act, 2012, which excluded non-commercial government buildings from tax liability for management, maintenance, and repair services. However, the decision to set aside the impugned order was based on factual grounds, and no separate finding was made regarding the retrospective amendment's relevance to the appellant's work orders.

5. In comparing the appellant's case with similar instances where demand proceedings were dropped for other companies like M/s. National Pump Services and M/s. Raj Engineering Co., the Tribunal highlighted the need for the Revenue to substantiate allegations of artificial bifurcation with sufficient documentary evidence. The Tribunal found no justification for including transaction values subject to VAT in the service tax levy, ultimately leading to the appeal being allowed and the impugned order set aside.