2017 (5) TMI 1460 - AT - Service Tax

Benefit of N/N. 12/2003-ST dated 20.06.2003 - exemption from service tax on the value of materials supplied to the client during the course of service - Held that - the invoices categorically indicate repair and service charges and supply of material charges separately. The VAT payable and service tax payable as per the applicable rates are shown separately. In view of these factual finding, the eligibility of the appellant for concession under N/N. 12/2003 cannot be denied - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility for exemption under Notification No.12/2003-ST for service tax on materials supplied during service.
2. Allegation of availing cenvat credit and its impact on exemption eligibility.
3. Penalty imposition under Sections 76 and 77 of the Finance Act, 1994.

Eligibility for Exemption under Notification No.12/2003-ST:
The appellant, engaged in repair and maintenance services for electrical transformers, received consideration from clients but only paid service tax on labor charges. The dispute arose when the revenue challenged the exemption claimed by the appellant for the value of materials supplied during the service. The original authority demanded short paid service tax of &8377;10,89,538, along with interest and imposed penalties under Sections 76 and 77 of the Finance Act, 1994. On appeal, the Commissioner (Appeals) upheld the tax liability but set aside the penalty under Section 76.

Allegation of Availing Cenvat Credit:
The appellant argued that they clearly separated repair and service charges from material supply charges in their bills, paying VAT on materials and service tax separately. They denied claiming any cenvat credit during the material time, explaining that the entries in their ST-3 return were not indicative of availing any credit. The appellant contended that they could prove non-availment of cenvat credit, essential for claiming the exemption under Notification No.12/2003-ST. The tribunal noted the need for verification of the appellant's cenvat credit claim by the jurisdictional officer to confirm their eligibility for the exemption.

Penalty Imposition under Sections 76 and 77:
The tribunal, after reviewing the invoices and factual findings, concluded that the appellant's eligibility for the exemption under Notification No.12/2003 could not be denied based on the separate billing of repair, service, and material charges. However, the verification of the appellant's claim of non-availment of cenvat credit was deemed necessary. If the jurisdictional officer confirms the appellant's assertion with supporting evidence, the benefit of the notification can be granted. Consequently, the tribunal set aside the impugned order, allowing the appeal in favor of the appellant.

Conclusion:
The tribunal's decision centered on the appellant's eligibility for exemption under Notification No.12/2003-ST for service tax on materials supplied during their service, emphasizing the importance of verifying the appellant's claim of non-availment of cenvat credit to determine exemption eligibility. The penalty under Section 76 was set aside, providing relief to the appellant based on the separate billing of charges and the need for further verification of cenvat credit status.