2017 (6) TMI 946 - AT - Service Tax

Classification of services - whether works contract services or maintenance and repair services? - period prior to 1st June 2007 - Held that - it is evident that the said deemed supply of materials in the execution of the works of contract has also been subjected to payment of sales tax/VAT. In this view of the matter, the work prior to 1st June, 2007 is also classifiable under the classification works contract as defined under Section 65(105) (zzm) of the FA - Diesel Locomotive Works Varanasi being a manufacturing facility of the railways or Indian Railway is also includable in the definition of railway as per definition hereinabove. Accordingly, the work done by the appellant for DLW is exempt under the definition of works contract under the FA - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Classification of work under service tax prior to and after 1st June 2007.
2. Applicability of works contract classification.
3. Exemption under the definition of works contract for work done for Diesel Locomotive Works Varanasi.

Analysis:
1. The Assessee contested the levy of service tax prior to 1st June 2007 under maintenance and repair, arguing against dual classification for the same work pre and post 1st June 2007. Citing a Supreme Court judgment, the Assessee claimed the work involved fabrication and repairs with material components, not fitting under maintenance and repair after 1st June 2007. The Revenue, on the other hand, objected to the classification of work post 1st June 2007 as works contract instead of maintenance and repair, as done for the prior period.

2. Upon reviewing the facts, it was established that the Appellant used and supplied materials in executing work for Railways, including replacement of components and payment terms involving material supply. The Tribunal found that the work pre-1st June 2007 could also be classified as a works contract under the Finance Act. The definition of works contract under the Act excluded work related to Railways, and considering the definition of Railway under the Railways Act, the work done for Diesel Locomotive Works Varanasi fell under the exemption of works contract classification. Consequently, the Tribunal ruled in favor of the Appellant, setting aside the demands mentioned in the show cause notice and granting consequential benefits as per the law. The Revenue's appeal was dismissed, and the Stay Application was disposed of accordingly.