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2017 (4) TMI 157 - AT - Service TaxValuation - Works contract - utilisation of materials in the repair and maintenance and have paid Sales Tax on the material portion - whether the Commissioner (Appeals) have rightly allowed the appeal of the respondent-assessee and set aside the demand of Service Tax ₹ 22,31,227/- along with interest and further equal amount of penalty u/s 78 and also penalty u/s 76 and 77? Held that - there is no error in the order & findings of the Commissioner (Appeals). In his findings, it is stated that it is a matter of composite contract wherein the appellant have supplied materials in the repair of Transformers.The appellant have suo-moto paid service tax on the labour component, have paid Excise duty on the manufacture of LV/HV coils, and further have paid Sales Tax on the material component used in the repair of the Transformers. In this view of the matter, the SCN is not tenable - appeal dismissed - decided against Revenue.
Issues:
1. Whether the Commissioner (Appeals) rightly allowed the appeal of the respondent-assessee and set aside the demand of Service Tax. Analysis: The appeal filed by the Revenue questioned the decision of the Commissioner (Appeals) regarding the demand of Service Tax amounting to ?22,31,227/- along with interest and penalties under various sections. The issue revolved around the respondent-assessee's payment of Service Tax only on "Labour Charges" under the category of management, maintenance, and repair services, while allegedly evading tax on the entire repair cost, including replaced items, under a composite agreement. The Revenue contended that the repair package rates included Excise Duty and Sales Tax/Trade tax, and thus, Service Tax should be applicable on the entire cost of repair. The Revenue's case was based on findings from a visit to the business premises, examination of records, and a statement from the authorized signatory. The show cause notice was issued for the extended period of 2005-06 to 2009-10, demanding Service Tax along with penalties, which was confirmed upon adjudication. The Commissioner (Appeals) held that the nature of work performed by the respondent-assessee constituted a works contract as materials were used and supplied in the repair of Transformers for clients. The repair package rates were inclusive of Excise Duty and Sales Tax/Trade tax, and the contract specified the breakdown of charges, including labour charges, price of HV/LV leg coil, transformer oil, and supply items. The Commissioner concluded that as the respondent had paid Sales Tax on the material portion under a composite contract, no additional Service Tax could be demanded. The Appellate Tribunal, after examining the records and arguments, found no error in the Commissioner's findings. It was determined that the respondent had already paid Service Tax on the labour component, Excise duty on LV/HV coils, and Sales Tax on the material component used in the repair, making the show cause notice untenable. In the final judgment, the Appellate Tribunal dismissed the Revenue's appeal, concurring with the Commissioner (Appeals)'s decision. The respondent-assessee was deemed entitled to any consequential benefits resulting from the dismissal. The judgment highlighted the importance of correctly categorizing contracts involving material supply and repair services to determine the applicability of indirect taxes like Service Tax, Excise Duty, and Sales Tax.
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